tax relief on commercial mortgage interest

[Incredulum]

Yes indeed, I think we've all tied ourselves up in knots, not least OP's accountant.

1.

I can only claim the amount of interest that would have been payable on the original loan, not the increased loan as I did not use the money for the business.

Wrong. The quantum of the original loan is relevant for absolutely nothing (except in the coincidental case where the capital account exactly equals the original loan).

2.

[Revaluation] is more often used in manufacturing etc where assets are often tied up as stock...

It appears extremely unlikely that stock can be revalued in order to generate capital that can be withdrawn until the stock has been sold.

[wamstax]

It appears extremely unlikely that stock can be revalued in order to generate capital that can be withdrawn until the stock has been sold.

HMRC are alive to making adjustments to loan interest relief and they only take into account REALISED profits in calculating what is available to draw on. So revaluations to capital account will be taken seriously and probably suggest that the taxpayer and adviser have conspired to hide the overdrawn capital account - which is a pointer for risk assessment in any trader. Look out for penalties when you eventually settle on a deliberate and concealed basis as opposed to the lighter deliberate but not concealed.
hope that this helps
bill@wamstaxltd.com
www.wamstaxltd.com