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Gift and Inheritance Tax (Capital Acquisitions Tax – CAT)

  1. Overview
  2. What do you pay CAT on?
  3. What do you not pay CAT on?
  4. How do you calculate CAT?
  5. How and when do you pay and file?
  6. What charges are there for late filing?
  7. Adverse possession
  8. Powers of revocation

Powers of revocation

A gift that is subject to a power of revocation means that the person making the gift has reserved the right to revoke the gift. No Capital Acquisitions Tax (CAT) is due in this situation.

CAT becomes payable if the person who gave the gift either:

  • releases the power of revocation and it becomes a full gift for CAT purposes
  • or
  • dies and the gift becomes an inheritance.

If you have free use of a benefit that is subject to a power of revocation, a charge to CAT may arise. CAT is calculated on the annual value of the benefit. 

This benefit is deemed to be taken on 31 December for each year that you have free use of the benefit.

  • Example

    On 1 January 2014, Eoghan transfers his house to Declan. He reserves the right to revoke that transfer. However, Declan has free use of the property. Eoghan dies on 30 June 2017 without having exercised the power of revocation. After Eoghan dies the house is valued at €500,000. The value of the market rent from January 2014 to December 2017 is €20,000 per year.

    Declan has the following benefits each year:

    - on 31 December 2014 a gift of €20,000 (as the rent for the property would have been €20,000)

    - on 31 December 2015 an inheritance of €20,000 (because Eoghan died in 2017, the gift of €20,000 has become an inheritance)

    - on 31 December 2016 an inheritance of €20,000 (as above)

    - on 30 June 2017 an inheritance of €10,000 (six months of the annual rent of €20,000)

    - on 30 June 2017 an inheritance of €500,000 (this is the full value of the house Declan received). 

    A gift becomes an inheritance where the date of the gift is within two years prior to the death of the disponer. The Small Gift Exemption still applies in this instance.

Published: 01 March 2024 Print this page

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