EU Requests UK To Revise Inheritance Tax Rules

by Robert Lee, Tax-News.com, London

02 February 2009

The European Commission has formally requested the United Kingdom (UK) to amend its legislation which provides for discriminatory inheritance tax relief.

The requests take the form of reasoned opinions. If no satisfactory reaction to these reasoned opinions is received within two months, the Commission may decide to refer the matter to the Court of Justice of the European Communities.

The reasoned opinions adopted by the Commission concern inheritance tax reliefs which are granted for agricultural and forestry property, respectively.

The inherited agricultural property must be in the UK, the Channel Islands or the Isle of Man and the inherited forestry property must be in the UK in order for the taxpayers to be entitled to the relief. The tax relief is not available when the inherited agricultural and forestry property is situated elsewhere in the EU or EEA.

The limited scope of the relief may dissuade taxpayers from investing in agricultural and forestry property outside the UK.

Consequently, the Commission considers that the United Kingdom's legislation, in its current state, is not compatible with the free movement of capital provided by Article 56 of the EC Treaty and Article 40 of the EEA Agreement.

The Commission is of the opinion that the UK should allow inheritance relief for all agricultural and forestry property situated in other EU and EEA Member States, as it does for similar property in the UK.

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