Q&A

I recently bought a "Live/Work" apartment in Dublin. This is a one-bedroom apartment with an office. It wasn't ideal but at the time it seemed as good as getting a two-bedroomed apartment.

I have since learned that even though I'm a first time buyer and the floor space is under 125 sq m, I may be liable for stamp duty on the "office" part of the apartment. I have no intention of using the "office" for non-residential or commercial use and instead plan to use the room as a second bedroom.

Can you tell me that if I can prove to the Revenue that I will not use the apartment for commercial purposes then I will be exempt from any stamp duty?

Mr T.B ,Dublin

Live/work apartments are a very new concept in the Irish market, which is a bit of a relief to me as I had never even heard of them until your letter.

Apparently, although they have been a feature of the London apartment scene since the late 1990s, live/work apartments were introduced to Dublin buyers for the first time at the start of last year.

While developers may sell these units as something tailored to the homeworker, I gather the truth is that they occupy sites that are zoned for both residential and commercial use. Constructing work/live units allows the developers to accommodate of the commercial element of the development in what is essentially a residential complex.

The downside of the novelty of such apartments is that there appears to be considerable confusion around the issue of how such units should be taxed. Essentially, they are only recently crossing the radar of the Revenue and tax advisers.

As a broad principle, mixed use dwellings are taxed according to the proportions allocated to different functions. So, for instance, in a bed and breakfast property that doubles up as a family home, the elements used exclusively for the business are excluded from reliefs that would apply to an owner's principal private residence.

The important word there is "exclusively". It would seem to imply that your choice to use the entire apartment as a residence would allow you to retain your stamp duty exemption as a first-time buyer.

However, as these apartments are specifically designated part-commercial to comply with planning requirements. That could well mean they are deemed part commercial regardless of your use. If that were so, the proportionality rule would mean that, if the office space accounts for a third of the floor area of the apartment, one-third of the purchase price of the apartment will be liable to stamp duty.

As you can see, your letter poses as many questions as answers. I can tell you that any selling agent approached on the subject would advise you to consult a tax adviser and - given the sums involved - that would seem to be the best advice.

Stamp duty

I am not sure if you are correct in your assertion last Friday regarding stamp duty clawback. You maintain that if "you rent or sell" a property which qualified for the lower first-time buyers rate within five years of purchase, you will face clawback at existing homeowners' level. I thought that the clawback only occurs in cases where the property was rented (in instances apart from rent a room relief) rather than sold.

I always understood the difference between the person letting and selling to be fairly logical on the basis that, if you decided to rent a property, you immediately changed your status from being a first-time buyer to investor, whereas anyone could for any number of reasons be forced to sell a house (within five years) through no fault of their own and it would appear quite unreasonable to punish someone for such an eventuality.

In any case, following such a sale, such a person has lost the first-time buyer status if and when he /she buys again.

Mr B.H., email

You are quite correct in your understanding. First-time buyers who avail of stamp duty relief as owner occupiers and who subsequently rent all or part of the property within the first five years will find themselves subject to a clawback of the relief granted. The one exception is for those homeowners who avail of the restrictions on rental income available under the rent-a-room scheme.

First-time buyers who sell within five years of purchase will not find themselves liable to a charge to stamp duty under clawback arrangements. Sorry for the confusion.

Holiday home

My husband and I married in 1962 and in 1964 bought our first and only home, in which we still live. In 1964 it was quite usual for the husband's name to be on the mortgage and subsequently the deeds and it was only after the mortgage had been cleared that we asked our solicitor to put the house in joint names, which he did.

Now we want to buy a little cottage in the country and will spend around €200,000. My question is this: If we buy the cottage in my name only, can I be deemed to be a first-time buyer and avoid some or all of the stamp duty?

Ms Z.D., email

I can see the attractions of the idea but I am afraid that you will not be eligible for stamp duty relief as a first-time buyer.

As far as the Revenue is concerned, the original purchase was made by you as a married couple and you would therefore be seen as an existing homeowner.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended 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.