Here are the allegations, as summarised in a Lib Dem press release issued this afternoon:

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.

He 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.

The Liberal Democrats have calculated that if Mr Osborne had paid tax for those two years, he would have been liable for £54,948. David Cameron has banned his MPs from flipping their homes and avoiding paying capital gains tax.

Here’s the story in The Times:

George Osborne, the Shadow Chancellor, is to be investigated by a sleaze watchdog after revelations in The Times over his second-home allowance claims. … [John Lyon, the Parliamentary Commissioner for Standards] is to look into a complaint about Mr Osborne’s claims for a second-home allowance after it emerged that he had taken out a mortgage on his constituency home that was nearly £5,000 more than its purchase price.

… Mr Lyon said he would look into a claim that “Mr Osborne claimed for mortgage payments that were not necessarily incurred, contrary to the rules of the House”.

“Since your complaint involves allegations relating to events of over seven years ago, I have consulted the House of Commons Committee on Standards and Privileges and they have agreed to me initiating an inquiry into this part of your complaint.” He said that he put the claims to Mr Osborne, adding: “When I have received his response, I will consider best how to proceed.”

And here’s what Lib Dem Treasury sokesman Lord (Matthew) Oakeshott has to say about the allegations:

George Osborne should know that you can’t tell the taxman one story and the fees office another. We asked him to come clean and pay the taxpayer back weeks ago but he did nothing.

“This is a real test of David Cameron’s leadership – he needs to make his Shadow Chancellor pay back the tax he’s dodged. 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.”