The Commission has formally requested the UK to amend its legislation which provides for discriminatory inheritance tax relief. The requests take the form of reasoned opinions which is the second step of the infringement procedure of Article 226 of the EC Treaty.
If no satisfactory reaction to these reasoned opinions is received within two months, the Commission may refer the matter to the ECJ.
The reasoned opinions concerns 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. 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 EC Treaty and Article 40 of the EEA Agreement.
The rules for a similar inheritance and gift tax relief in Ireland were amended recently to allow agricultural relief on land located in a Member State of the EU. Previously, the relief was only available on agricultural property situated in the State.
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