- ICAEW believes businesses need more time, guidance, and support to effectively implement a UK carbon border adjustment mechanism (CBAM).
- ICAEW’s Tax Faculty supports CBAM to address carbon leakage and promote cleaner production globally but finds proposed compliance timelines overly ambitious.
- Recommended changes include simplifying compliance processes for businesses.
- **Purpose of a CBAM:**
- Applies a charge to imported goods based on embedded emissions.
- UK CBAM to be introduced from 1 January 2027, initially covering imports of iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement.
- **ICAEW’s Concerns:**
- Timelines for compliance may be too challenging, e.g., a five-month deadline for emissions data may be too short.
- Quarterly reporting from 2028 could be a significant administrative burden.
- Proposed a gradual transition with six-month reporting periods in the second year.
- **ICAEW’s Recommendations:**
- Consider a tiered approach to default emissions values based on data availability and reliability.
- Provide comprehensive guidance and support, especially for SMEs.
- Regularly review and update default values, CBAM rates, and system parameters.
- Establish mutual recognition agreements with other countries for streamlined reporting.
- Provide clear enforcement guidelines and examples of punishable non-compliance actions.
Source: icaew.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
