Thousands of first-time home buyers are facing significant tax bills following a clampdown by the Revenue Commissioners. People buying second-hand homes with the help of their parents could find themselves confronting an unexpected stamp duty charge of thousands of euro that they have not budgeted for.
Aspiring purchasers may not realise their exposure to stamp duty until they close the deal on their home. At that stage, many are stretched to their financial limit.
The loss of stamp duty relief will affect most severely those who are on relatively low incomes or whose parents are not able to provide an outright cash gift to help them buy a home.
Following a clampdown by the financial services regulator, mortgage lenders increasingly require parental support of mortgage applications. Most often, this amounts to acting as guarantor on the loan - a situation that Revenue confirmed last night would not lead to loss of stamp duty relief. However, where there are more serious doubts about the borrower's ability to repay the loan, parents can be required to put their names on the mortgage documents. That, according to Revenue, would mean a loss of relief on stamp duty.
In guidance issued to solicitors last month, the Revenue stated: "To qualify for the relief, the entirety of the purchase monies, including any borrowings, must be provided by the first-time buyer.
"Any person who provides part of the purchase monies or who is party to any borrowings relating to such purchase is also regarded as a buyer of the house and the relief will not be available unless that other person is also a first-time buyer." Figures from the industry indicate that such co-lending arrangements account for around 10 per cent of lending to first-time buyers. On the basis of the €227,321 average price paid by a first-time buyer, according to the most recent Permanent TSB/ESRI house price survey, stamp duty could amount to more than €9,000.
The survey also showed that more than 40 per cent of first-time purchasers were opting for second-hand property, which has no automatic exemption on stamp duty.
And for those buying towards the top of the price range now exempt from stamp duty - €317,500 - the Revenue could be looking for as much as €15,875.
A spokeswoman for AIB last night said the bank was taking independent legal advice on the Revenue's guidelines. "The question is whether Revenue is acting beyond the strict terms of the legislation," she said.
The former chairman of the Law Society's conveyancing committee, Patrick Dorgan, said the Revenue move was the latest in a series of assaults on the first-time buyer's entitlement to stamp duty relief.
