Capital Acquisitions Tax Consolidation Act 2003 section 40

Free use of property, free loans, etc

Section 40 deals with the taxation of the free use of property, deeming a person who is allowed to use property they do not beneficially own to take an annual gift (or inheritance) equal to the market value of that use.

• A person allowed the free use, occupation or enjoyment of property to which they are not beneficially entitled in possession is deemed to take a gift in each calendar year (or part thereof) during which they have such use, valued at the difference between the open market value of the use and any consideration actually paid.
• The deemed gift is treated as taken on 31 December of each year, or if the use ceases earlier, immediately before the date on which the use comes to an end.
• Where the free use arises under a will, from a disposition made within two years before the disponer's death, or following the cesser of another person's life interest, the deemed benefit is treated as an inheritance rather than a gift.
• The notional sum representing the free use is deemed not to be situated in the State, so whether a tax charge arises depends on the residence and domicile status of the disponer and the beneficiary, rather than on the location of the property itself.