Capital Acquisitions Tax Consolidation Act 2003 section 31

Distributions from discretionary trusts

Section 31 sets out the rules for taxing benefits received from discretionary trusts, determining whether such benefits are treated as gifts or inheritances for Capital Acquisitions Tax purposes.

• Where a person becomes beneficially entitled in possession to a benefit from a discretionary trust, otherwise than for full consideration in money or money's worth, the benefit is subject to Capital Acquisitions Tax.
• A benefit taken from a standard discretionary trust (one not falling within the special categories below) is deemed to be a gift.
• A benefit taken from a discretionary trust created by will, by a disposition made on or after 1 April 1975 and within two years before the disponer's death, or by an inter vivos disposition limited to come into operation on a death, is deemed to be an inheritance.
• The initial settlement of property into a discretionary trust does not attract mainstream CAT because no person takes a beneficial entitlement in possession at that time; tax arises only when distributions are actually made.