Dominic Coyleanswers your questions.

Stamp duty clawback

I recently bought a property and as a result of being a first-time buyer, I was exempt from paying stamp duty. A colleague of mine recently told me that if I was to sell this property within the next five years, I would be liable to pay stamp duty on it, eg the amount that I should have paid originally, but did not as I was exempt. Is this correct?

Mr C.G., Dublin

Your friend is indeed correct. First-time buyers are entitled to an exemption from stamp duty on the basis that they are owner-occupiers. The measure is designed to assist those looking to get on to the housing ladder.

However, if you sell the property within the first five years of ownership, the Revenue is entitled to claw back the relief. This means that they will charge you the difference between what you should have paid if you had not been a first-time buyer and what you actually did pay in stamp duty.

Given that you are entitled to a full exemption, you would face the full stamp duty bill that would have applied if you had been an existing homeowner. The same rules apply if you retain the property but move out of it and rent it out. In these circumstances, you would be seen as an investor rather than a first-time buyer and the same clawback rules apply.

Tax on equity release

My brother has offered to buy my widowed mother's house from her, giving her the current market value of €375,000. She will remain in the house rent-free for as long as she wants.

My brother has also offered to give my other brother and I €125,000 each.

Can you please advise on the tax liability implications, firstly for my mother and secondly for my brother who is to receive the money, and for myself. My brother resides in the US and has done so for almost 20 years. I reside in the State.

Mr R.C., Dublin

This is a situation in which an increasing number of families find themselves. With the rising price of property, elderly people often find themselves asset-rich but cash-poor - all their money is effectively tied up in their home.

How to release the equity is the question. There are certainly a number of commercial finance houses that will offer equity release, either by way of life loans or a lump sum payment in exchange for control of a portion of the property upon the owner's death or departure from the property.

I have stated more than once that such products, while useful to people with no other options, should be a last resort. In general, particularly with lump sum equity release, you will receive far less than the true value of the property.

If a family can organise equity release among themselves, it is almost always a better solution.

Having said all that, I would serious suggest that your brother contacts a financial adviser before undertaking this transaction. I believe that he should be able to organise it in a more tax-efficient manner than the arrangement that you outlined in your letter.

On the basis of the letter, your mother would not face any capital gains tax charge on the assumption that she is selling her main private residence.

However, your brother who is buying the house could face stamp duty issues on the transfer. Depending on the circumstances, he might be able to avail of consanguinity relief, which could halve any stamp duty bill.

While your brother intends to let your mother to continue to live in the property rent-free, that would constitute a "gift" in the eyes of the Revenue. As such, she would be liable to capital acquisitions tax (CAT). Effectively, an annual letting value would apply to the house. This can be self-assessed but, if the Revenue were to disagree, it could appoint a valuer to assess the value of the annual rental.

Under CAT, anyone is entitled to an exemption on the first €3,000 received in any given year. Thereafter, the cumulative threshold for gifts from a son to a mother is currently €49,682, although there is some possibility of CAT relief on gifts from relatives, depending on the financial circumstances of both parties.

Turning to the €125,000 being gifted to yourself and your brother in the US, in your case, it is straightforward. CAT applies and, on gifts between siblings, the threshold currently is €49,682 - over and above the annual €3,000 exemption. Thereafter, the CAT tax rate is 20 per cent.

Your brother in the US could face a more awkward position. I am advised that he will be liable to CAT here as the disponer (,eg your other brother) is resident here. However, he could also face a tax bill in the US.

For all these reasons, I really think that your brother should take professional advice.

• Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by e-mail to dcoyle@irish-times.ie.

This column is a reader service and is not intended to to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.