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Carbon emissions tax technical note updated

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HMRC has published an updated version of the technical note originally published at Budget 2018 and amended subsequently in line with Brexit developments. The latest update focuses on the period from the proposed start date of 4 November 2019 to 31 December 2020, providing further information on 2019 reporting obligations.

If the UK leaves the EU without a deal on 31 October, the government has already announced it would introduce the new carbon emissions tax from 4 November 2019. The new tax would replace the UK’s participation in the EU ETS, while meeting existing carbon reduction targets (excluding the aviation sector).

The normal operation of the tax would involve those UK installations covered by the EU ETS paying carbon emissions tax based on their emissions of greenhouse gases in excess of a tax emission allowance for each calendar year.

The emissions reporting period under the tax would normally cover 12-month periods running from 1 January. However, with the tax due to start on 4 November 2019, the note sets out the amended initial emissions reporting periods. These would require a single verified emissions report by 31 March 2021, which would include two emission statements covering:

  • 4 November 2019 to 31 December 2019; and
  • 1 January 2020 to 31 December 2020.

The March 2021 emissions report would enable HMRC to calculate the tax on all emissions above the tax emission allowances for 2019 and 2020. The tax rate for the period from 4 November to 31 December 2019 has already been announced at £16 per tonne. The 2020 tax rate would be set at Budget 2019. HMRC would send bills each May (starting in May 2021) covering emissions from the previous emissions reporting period, requiring payment within 30 days. The 2019 tax emission allowance would also be adjusted to reflect the fact that the tax is expected to apply for only 58 days in 2019. 

The government consulted between 3 May and 12 July on some long-term options for carbon pricing following Brexit (see A full response to that consultation is awaited. The technical note explains that If the carbon emissions tax were to continue beyond 2020, details of how the tax would operate, including how the government would set the tax emission allowance from 2021, would be announced at a later date.


Issue: 1455
Categories: News