From the Brussels Office

Cross border estates

On 14 October the European Commission proposed legislation designed to address current problems in the devolution of cross border estates. The proposal includes common rules for determining jurisdiction and applicable law. It also provides for mutual recognition of decisions in succession matters and the issuance of a European certificate of succession.

Significant concerns include the potential for lifetime gifts, such as gifts to charities, to be brought back into a person’s estate for distribution to their family, and the use of habitual residence on death to identify jurisdiction and applicable law. The UK has a choice whether to opt in to this measure. The Ministry of Justice launched a consultation on the proposal on 21 October, which runs until 2 December 2009. The House of Lords issued a call for evidence on 26 October with responses requested before 27 November. Both the Law Society of Scotland and the Law Society of England & Wales submitted responses to a consultation on the Commission’s earlier green paper in 2005.

VAT carousel measures

In an attempt to combat carousel fraud, on 29 September the European Commission proposed a reverse charge scheme, which will apply to goods deemed most susceptible to carousel fraud, including mobile phones, perfumes, precious metals and greenhouse gas allowances. Under the scheme, VAT registered purchasers of the goods (rather than suppliers) will be required to account for VAT, but can seek recovery in the normal way. The UK has applied a reverse charge scheme to sales of mobile phones and computer chips since 1 June 2007.

Carousel fraud occurs when traders exploit the intra-Community VAT system, where cross border transactions are generally zero rated, by using a fabricated chain of contracts to illegally retain VAT charged and reclaimed.