First thing, did she gift it personally, or did she do a Deed of variation to split inheritence with you both (to say avoid future IHT payable twice). if you , by Deed of variation, inherited it direct form deceased relative it was never her money and her money to gift to you, it came direct from the deceased estate at probate. Her decision, but never her money.
a gift is just that as far as HMRC are concerned. Whether by deed of variation, inheritance itself, or not. Something without limitation, conditions or ties. She is, in effect asking you to gift her £50k, when you don’t have it. You are not paying it back, or giving it back..she never said it was a loan or asked you to sign a promissory note. Nor did she say she might need it back. Otherwise I assume you’d have not taken the risk to sink it into the house
This is a mess, and a good reason why everyone should think twice or more about gifting large sums to adult kids as they get older. It’s a lovely gesture, but you simply don’t know what’s round the corner and you’ll need menu for later. Once retired, you never increase your income outstripping inflation, as you do with job changes/ promotions, you have little spare to take loans or make savings for unexpected costs.
your answer is that you too have spent it. In exactly same way as your brother has. You no longer have it. To move house you will loose your own money too; conveyencing fees, estate agents, moving costs, stamp duty, and all the myriad of little costs like new curtains cos old ones don’t fit. If you extend your mortgage to gift her this sum (supposing you could actually do that) you will them be paying additional interest in long term …you cannot do this without emeritus long term financial consequences
she needs to be speaking to both you and brother, as you have BOTH spent the gift in full. There may be other ways you could help her out, but it sounds like she made a basic silly short sighted mistake to be seen as generous to you both. It’ll not help your relationship I imagine, but you needctocemsurecthiscfalls squarely on both you and your brothers shoulders and not just yours as you’ll bear the weight of being the child at fault for years to come and the fall out from that. With both her children stating “mum, we understand your issue, however you gifted it to us out right and didn’t lend it and therefore the money is spent in the way you intended it to be used at our discretion. we simply don’t have £25k each available to gift to you at this stage of our lives”. And then ask if she wants help exploring her options. Don’t let her set you up against your brother on this.