It is instead a Capital Acquisitions Tax (CAT) charge under section 40 of the Capital Acquisitions Tax Consolidation Act 2003 (CATCA 2003) on the annual “benefit” of free (or below-market) use of property held in a trust. revenue.ie +1 Why this applies to trust property

• When a beneficiary (e.g., an adult child or other person) who is not yet beneficially entitled in possession to the full property lives rent-free (or pays below-market rent) in trust-owned property, Revenue treats the free use as an annual taxable gift/benefit.
• The benefit is deemed taken on 31 December each year (or the day before the use ends).
• Value: Market rental value for the year (what an unconnected tenant would pay), minus any rent actually paid and the €3,000 small-gift exemption (per disponer, per year). canisgallicus.com
• CAT is charged at 33% on the amount exceeding the relevant group threshold (e.g., Group A €400,000 lifetime from a parent, with aggregation of prior gifts/inheritances since 5 December 1991). Trustees or the beneficiary may have filing obligations.

Who has to pay it?

The beneficiary (the person living in the property — in your case stated, the individual with illnesses who is now over 66) is the one who takes the “gift” and is liable for any CAT due. They must file a CAT return (Form IT38) online via myAccount or ROS, even if claiming an exemption. Trustees may also have responsibilities (e.g., for Discretionary Trust Tax if applicable).

Who has to pay it? The beneficiary (the person living in the property — in your case, the individual with illnesses who is now over 66 pension age) is the one who takes the “gift” and is liable for any CAT due. They must file a CAT return (Form IT38) online via myAccount or ROS, even if claiming an exemption. Trustees may also have responsibilities (e.g., for Discretionary Trust Tax if applicable).

Reliefs available because of illnesses (and potentially age 66) A person in the situation stated is much more favourable than a standard case due to the illnesses. Revenue provides strong exemptions for people who are permanently incapacitated (physically or mentally unable to maintain themselves). These can eliminate or greatly reduce the liability:

• Section 82 CATCA 2003 (normal & reasonable support/maintenance): Gifts or benefits (including free accommodation) provided for the support/maintenance of a permanently incapacitated child (of any age) are fully exempt from CAT. Free use of a property set aside for this purpose widely qualifies as “maintenance”. Revenue guidance explicitly supports this for incapacitated beneficiaries (unlike healthy adults).
• Section 84 CATCA 2003 (qualifying expenses of incapacitated persons): Any benefit taken exclusively for discharging qualifying medical expenses (including maintenance connected with medical care, home adaptations, therapies, etc.) is exempt. Accommodation that enables independent living can qualify. revenue.ie +1
• Discretionary Trust Tax (DTT) relief: If the trust is exclusively for a person incapable of managing their affairs due to incapacity, it can be fully exempt from the 6% initial + 1% annual DTT charges.
• Dwelling House Exemption (section 86): May apply on a future absolute appointment of the property if the beneficiary has lived there as their main residence for 3+ years and meets other conditions (stronger case for incapacitated/dependent relatives). canisgallicus.com

Age over 66 does not provide a standalone exemption here, but combined with illnesses it strengthens the incapacity claim (e.g., “dependent relative” definitions sometimes reference over-65 incapacity in related reliefs).

mcmahonsolicitors.ie Trust funds for permanently incapacitated people may also qualify for broader tax exemptions (income, CGT, etc.) if the trust meets specific rules and medical evidence is provided.

citizensinformation.ie What the person (or their representatives) should do next

What the person (or their representatives) should do next

1. Gather evidence immediately:
   • Full trust deed/will (to confirm right of residence or discretionary terms).
   • Medical certificate/evidence from a doctor/specialist confirming permanent incapacity (unable to maintain self due to physical/mental infirmity). Disability Allowance or similar social welfare records can help.
   • Property valuation or rental estimate (from an auctioneer if needed).
2. Seek professional help urgently (strongly recommended):
   • A solicitor specialising in trusts/estates and a tax adviser (e.g., STEP-qualified or with Revenue CAT experience).
   • They can prepare a response to Revenue’s notice, claim the exemptions, file the IT38 return, and seek a binding Revenue opinion. Deadlines are strict (typically 4 months from the valuation date), and penalties/interest apply for late filing.
3. Contact Revenue:
   • Use MyEnquiries (or your local Revenue office) referencing the specific notice.
   • File the IT38 return online claiming the relevant exemption(s) and attaching evidence.
   • Many similar cases result in no tax payable once properly documented.

This is not personalised tax or legal advice — tax rules depend on the exact trust terms, medical facts, and individual circumstances. Professional advice is essential to avoid unnecessary tax and secure the reliefs. You can start by checking Revenue’s official pages on free use of property and CAT exemptions for incapacitated individuals, or Citizens Information for guidance on trusts for people with disabilities. Act quickly to protect the position.

8 web pages

CAT exemptions details

Trust setup Ireland