Tory Shadow Chancellor dodged £55,000 tax bill by 'flipping'

George Osborne avoided £55,000 in capital gains tax by 'flipping' his second home allowance, figures calculated by the Liberal Democrat treasury team have revealed.

Mr Osborne claimed his second home allowance on a London property for two years which he later sold for £1.48m - a £748,000 profit. He did not pay capital gains on this because he had declared it as his main home since 1998, despite claiming mortgage interest payments on it from the House of Commons.

The capital gains liabilities for those two years would amount to £54,948.

Reacting Matthew Oakeshott said; "This is a real test of David Cameron's leadership. He blackballed his country gentlemen with their moats and duck houses before their feet could touch the ground. But will he make his Shadow Chancellor pay back the tax he's dodged?"

George Osborne used his second homes allowance on a London property and then switched it to a large farmhouse in his Cheshire constituency of Tatton. He bought the Cheshire residence ten months before he won his Tatton seat in 2001. Instead of taking out a mortgage on the farmhouse he increased the mortgage on the London property which he bought for £700,000 in 1998.

George Osborne designated the London house his second home, even though it was his main residence, so he could claim mortgage interest payments. Two years later he took out a separate £450,000 mortgage on the farmhouse, made that formally his second home, and has since claimed £100,000 on it. It is claimed that Mr Osborne was able to reduce the mortgage on his London home to less than £200,000 before he sold it for £1.48million in 2006, making a £748,000 profit. He did not pay capital gains because he had declared it his main home since 1998 with the tax authorities - despite the two years it was formally designated as his second home with Commons officials.

Matthew Oakeshott concluded; "You can't tell the taxman one story and the fees office another. It looks like Cameron has either got one rule for the Notting Hill set and another for the knights of the shires, or that George Osborne is simply too close to chop."

"Unless Osborne pays the tax both he and Darling will be a pair of flippers."