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George Osborne “flipped” the designation of his official second home from his London residence to his constituency home after taking out a £450,000 mortgage on the property.

The Shadow Chancellor bought the Cheshire farmhouse close to his constituency ten months before winning the Tatton seat in June 2001.

Instead of taking out a mortgage on the property he funded the purchase by increasing his borrowing on the London home where he and his wife had lived since 1998.

After his election he designated the London house his “second home” with the Commons authorities, even though it was his main residence, so that he could claim the mortgage interest payments on his expenses.

Two years later Mr Osborne took out his first mortgage on the house in Cheshire and made that his official second home. He has since claimed up to £100,000 of taxpayers’ money to cover interest payments on the farmhouse, which is situated on the edge of Peak District National Park.

The arrangement also enabled Mr Osborne to reduce the loan on his London home, which he later sold for £1.45 million, to less than £200,000.

Mr Osborne said last night that he had made no personal gain from the flip and that there was no impropriety or suggestion of wrongdoing. He said that after being elected an MP he had been advised by the Commons’ Fees Office to declare the London house as his second home so that he could claim expenses for his mortgage interest payments until he was able to change his loan arrangements.

However, the disclosures will lead to further questions for the Shadow Chancellor after David Cameron said that it was “not good enough” for MPs simply to claim that they had abided by the rules on expenses. The Conservative leader has banned the practice of “flipping” and of avoiding capital gains tax. Since his election Mr Osborne has claimed close to the maximum limit for MPs’ second homes under the Additional Cost Allowance (ACA).

The Shadow Chancellor’s spokesman said that Mr Osborne had been advised initially to claim the ACA on his London family home because it had been used to raise the mortgage on his constituency property.

In 2003 he was able to transfer that portion of the interest-only mortgage to his Cheshire home without breaking the terms of that original loan or incurring penalty fees, said his spokesman. He then claimed ACA against the new mortgage payments which have fallen close to zero because of the reduction in interest rates.

“This is entirely reasonable as all the costs are associated with his need to have a second home in Cheshire, and his arrangements have always sought to minimise the interest costs to the taxpayer,” the spokesman said.

Mr Osborne and his wife Frances bought their first family home in Notting Hill, West London, for £700,000 in April 1998. Land Registry records show that by June 2000 the couple had an outstanding mortgage of £150,000, with Halifax.

The couple remortgaged the family home four months later for £620,299. The loan was guaranteed by Mr Osborne’s father Sir Peter Osborne, founder and chairman of the fabric and wallpaper group Osborne & Little.

Part of this mortgage was used to buy the farmhouse in the same month.

The sellers wanted a quick cash sale and the easiest way to raise the money was to increase the existing mortgage on his London home, Mr Osborne’s spokesman said.

Three years later the Osbornes obtained a £449,995 mortgage on the Cheshire property while remortgaging the Notting Hill home with the same bank with a loan of just £199,875.

Mr Osborne and his wife, a writer and the eldest daughter of the former Conservative Cabinet minister Lord Howell, sold the London home for a £748,000 profit in July 2006. They moved just 250 metres, paying £1.85 million for a new home which last year had an outstanding mortgage of £470,499.

Mr Osborne’s mortgage arrangements did not emerge in the recent reports on MPs’ expenses because the receipts dated back to only 2004.

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