Capital Acquisitions Tax Consolidation Act 2003 section 18

Computation of tax

Section 18 sets out the rate of tax on inheritances deemed to be taken by discretionary trusts under section 15, and provides for a reduced rate where trust property is distributed absolutely to beneficiaries within a specified period.

• The standard rate of the once-off discretionary trust charge is 6% of the taxable value of the inheritance deemed to be taken by the trust.
• The rate is reduced to 3% if all the trust property is transferred absolutely to one or more objects of the trust within five years of the relevant event (the death of the disponer, the death of a life tenant, or the date the youngest principal object reaches age 21, as the case may be).
• The five-year period (the "relevant period") runs from different starting points depending on the type of inheritance: from the disponer's death for an earlier relevant inheritance, from the life tenant's death for a settled relevant inheritance, or from the date the youngest principal object turned 21 for a later relevant inheritance.
• Where two or more persons are jointly entitled in possession to an absolute interest in trust property, they are not treated as having the required absolute entitlement merely because, acting together, they could demand the trust property — this prevents such joint entitlements from qualifying for the reduced 3% rate.