Gift and Inheritance Tax (Capital Acquisitions Tax – CAT)

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 power of revocation expires.

If you have free use of a property, that is subject to a power of revocation, a charge to CAT may arise.

A benefit is deemed to be taken on the 31 December of each year that you have free use of the property. However, if your free use comes to an end, the benefit is deemed to be taken the day before the free use ends.

You may have to file CAT IT38 Returns if you receive a gift subject to a power of revocation. For further information, please see Completing your Gift or Inheritance Tax Return.

  • Example

    On 1 January 2022, Eoghan transfers his house to his son Declan. Eoghan reserves the right to revoke that transfer. However, Declan has free use of the property. Eoghan dies on 30 June 2024 without having exercised the power of revocation. After Eoghan dies the house is valued at €300,000. The value of the market rent from January 2022 to December 2024 is €20,000 per year.

    Declan has the following benefits each year:

    - on 31 December 2022 a gift of €20,000 (as the rent for the property would have been €20,000)

    - on 31 December 2023 a gift of €20,000 (as above)

    - on 29 June 2024 a gift of €10,000 (six months of the annual rent of €20,000)

    - on 30 June 2024 an inheritance of €300,000 (this is the full value of the house Declan received).

    After allowing for the Small Gift Exemption, the net taxable value of the gifts are:

    - €17,000 in 2022 (€20,000 - €3,000)

    -€17,000 in 2023 (€20,000 - €3,000), and

    -€7,000 in 2024 (€10,000 - €3,000)

    Each of these gifts is taken into account for aggregation purposes.

    Assuming that Declan has not used any of his Group A threshold, no tax liability will arise in respect of these gifts.

    However, a tax liability may arise in respect of Declan's inheritance of the house on 30 June 2024.

    The relevant tax-free threshold that applies in respect of Declan's inheritance is €335,000. As Declan's inheritance, when aggregated with his prior gifts of €41,000 (€17,000 + €17,000 + €7,000), exceeds this threshold a tax liability may arise.

Published: 12 March 2026 Print this page

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