Capital Acquisitions Tax Consolidation Act 2003 section 39

Gift subject to power of revocation

Section 39 provides that where a disponer makes a gift but reserves the power to revoke it, the recipient is not treated as beneficially entitled in possession to the gift until the power of revocation is released or ceases to be exercisable.

• Normally, if you receive a benefit subject to a contingency (i.e. one that may end on a future event), the contingency is ignored for CAT purposes under section 41.
• However, section 39 creates an exception: where the disponer has reserved a power to revoke the gift, the recipient is deemed not to be beneficially entitled in possession to the benefit until the power of revocation is released or otherwise ceases to be exercisable.
• In practice, this means the property is treated as remaining with the disponer until he or she releases the power of revocation, or until he or she dies (at which point the power lapses and the recipient becomes beneficially entitled in possession).
• During the period between the original gift and the release or lapse of the power of revocation, if the recipient has free use of the property, he or she will be taxed each year on the value of that use as a gift under section 40 (free use of property).