George Osborne is to be investigated by the parliamentary standards watchdog over claims that he “flipped” the designation of his second home.

The Shadow Chancellor also faces an inquiry into why he claimed expenses for a mortgage greater than the purchase price of his constituency residence.

The Times had disclosed that Mr Osborne funded the purchase of a Cheshire farmhouse in 2000 by increasing his borrowing on the London home. On being elected MP for Tatton in 2001 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 expenses. Two years later he took out his first mortgage on the house in Cheshire and made that his second home. It has subsequently emerged that this loan was for almost £5,000 more than he had paid for the farmhouse.

John Lyon, the Parliamentary Commissioner for Standards, is to ask him to explain his claims for additional cost allowance (ACA). In a letter to a Labour activist who lodged the complaint Mr Lyon said that he would investigate allegations that the “mortgage payments . . . were not necessarily incurred, contrary to the rules of the House”. He will not look at tax issues.

A spokesman for Mr Osborne said: “George has never switched designation for personal advantage. There has been no impropriety and any suggestion of such is wrong. All the costs are associated with his need to have a second home in Cheshire, and his arrangements have sought to minimise the interest costs to the taxpayer. This is a political complaint by the local Labour Party. We note that one has been made against Alistair Darling as well.”

It emerged later that the watchdog has not received a formal request to investigate Mr Darling’s claims for the second-home allowance, but is in correspondence with a potential complainant.

Under David Cameron’s “scrutiny panel”, Mr Osborne was asked to pay back £1,195.49, including a £440 bill for a taxi. The Liberal Democrat Lord Oakeshott of Seagrove Bay said: “It looks like Cameron has one rule for the Notting Hill set and another for the knights of the shires — or that George Osborne is too close to chop.”

Explaining why Mr Osborne changed the designation of his second home, his spokesman said that when he became an MP he sat down with a fees office representative and explained that the farmhouse “was his second home but that he had increased the interest-only mortgage on his existing home in London to cover the cost of purchasing and moving into it”.

The official had advised Mr Osborne to claim the ACA against that mortgage until he could change the mortgage arrangements. In 2003, when he could do that without incurring penalty charges, he secured a mortgage against the Cheshire property — and from then on claimed ACA against it, the spokesman said. “George Osborne has always made clear to the authorities and the Revenue that he regarded his home in Cheshire as his second home.” When a form was introduced in 2003 requiring MPs to name their “second” home, Mr Osborne had designated the Cheshire home, he said.

Reports on investigations by the Standards and Privileges Committee published this year

Jack Straw found "negligent" for failing to list a £3,000 donation. No further action taken.

Derek Conway ordered to apologise and return £3,757.83 after being investigated for payments made to his son Henry Conway.

Peter Hain investigated for failing to declare donations to his Labour party deputy leadership campaign totalling more than £100,000. Committee ruled that his offence was "serious" but that there was no "intention to deceive." He was ordered to apologise.

Caroline Spelman investigated for subsidising the cost of nanny services out of her parliamentary allowances. She was ordered to repay £9,600

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