Penalties, assessments and appeals

Failure to register

Paragraph 34 of Schedule 17 applies Schedule 41 to the Finance Act 2008 to the duty to register, with the potential lost revenue fixed as the tax for the period from the end of the registration deadline to the day the person registers or HMRC becomes fully aware. The penalty is 30 per cent of that revenue, 70 per cent where the failure was deliberate and 100 per cent where deliberate and concealed, reduced for disclosure to no less than 10, 35 and 50 per cent if prompted and 0, 20 and 30 per cent if unprompted. For a business that triggered in 2027 the revenue runs from 1 February 2028, and a business that registers late but before it has any tax to pay has a potential lost revenue of nil.

Failure to make a return

Paragraph 35 applies the penalty points regime in Schedule 24 to the Finance Act 2021. The CBAM return sits in Column B with a maximum of four points, except that regulation 3 of SI 2026/830 places the 2027 annual return in Column A with a maximum of two; the penalty when the maximum is reached is £200.

Inaccuracies

Paragraph 36 applies Schedule 24 to the Finance Act 2007: 30 per cent of the potential lost revenue for a careless inaccuracy, 70 per cent for a deliberate one and 100 per cent where deliberate and concealed, reduced for disclosure to no less than 15, 35 and 50 per cent if prompted and 0, 20 and 30 per cent if unprompted. The regime rewards disclosure, which is why an importer who finds an error should amend at once.

Late payment

Paragraph 37 applies Schedule 26 to the Finance Act 2021: a first penalty of 3 per cent of the tax unpaid fifteen days after the due date and a further 3 per cent at thirty days, then a second penalty at 10 per cent a year on the amount unpaid until it is paid, as substituted from 31 May 2025 by SI 2025/589, subject to the time to pay conditions. Interest runs separately under the Finance Act 2009 by virtue of SI 2026/994.

The Schedule's own penalties

Paragraph 38 attaches £500 and £40 a day to a failure to notify a change in registration information within thirty days, or to notify within twenty-one days that a person is carrying on the business of a deceased or incapacitated registered person. Paragraph 39 attaches £500 to a failure to keep or preserve a required record. Paragraph 40 provides a reasonable excuse defence, narrowed so that an insufficiency of funds is not one and reliance on another person is one only where reasonable care was taken, and paragraphs 41 to 46 let an officer assess, reduce and time limit the penalty, within four years of the failure or twenty where it involved a deliberate loss of tax or a failure to register.

Assessments

Paragraph 20 lets an officer assess the tax for a period to the best of the officer's judgement where there has been a relevant default, which covers every failure in the Schedule from registration through returns and records. Paragraph 24 sets the time limit at the earlier of four years from the end of the period and one year from the officer's knowledge of sufficient facts, or twenty years where the loss was deliberate or attributable to a failure to register, and treats a loss brought about by an agent as brought about by the importer.

The offences

Schedule 18 makes it an offence to be knowingly concerned in the fraudulent evasion of CBAM, including obtaining relief or a repayment without entitlement, and to produce or use a document false in a material particular or make a false statement. On indictment the maximum for each is fourteen years' imprisonment, a fine or both.

Review and appeal

Paragraph 48 lists the appealable decisions, from liability and amount through registration, repayments and the two Schedule 17 penalties. Paragraph 49 obliges HMRC to offer a review with the decision, with thirty days to accept, and paragraph 54 requires the officer to notify conclusions within forty-five days or the decision stands as upheld. Paragraph 57 gives thirty days to appeal to the First-tier Tribunal from the document or from the review's conclusion, and paragraph 58 requires the amount in dispute to be paid or deposited unless hardship is shown. Every clock runs from the date of the document, and accepting a review does not bar a later appeal, while appealing first withdraws the offer of a review.

The response procedure

Log the date on every HMRC document on the day it arrives and diarise the thirtieth day. Identify which penalty or assessment power the document relies on and read the paragraph. Decide within a week whether to accept the review. Where the document is an assessment, pay or deposit the amount, or prepare the hardship application, before the appeal is due. And on every Schedule 17 penalty, ask whether paragraph 40 gives a reasonable excuse and whether paragraph 45 justifies a reduction.