Purpose of corresponding deficiency relief

The taxpayer had calculated his liability to capital gains tax for 2006-07 and 2007-08 at the 20% rate. HMRC opened enquiries into both returns under TMA 1970 s 9A and issued closure notices amending the rate to 40%.

The First-tier Tribunal dismissed the taxpayer’s appeal. The issue concerned the interaction between TCGA 1992 s 4 and s 6 and ITTOIA 2005 s 539 (corresponding deficiency relief (CDR) in relation to chargeable events from life insurance policies). The taxpayer said his claim for CDR resulted in the lower rate of 20% applying to the gain. This was because his income could be reduced to a negative amount in determining the unused part of the basic rate band for the purposes of TCGA 1992 s 4(4). HMRC disagreed saying s 6(2) could not produce a negative answer.

The Upper Tribunal said reliefs and allowances available as deductions...