Negative income is not a meaningful concept

The taxpayer had substantial gains arising from investments in life assurance policies. His accountant calculated his capital gains tax liability for 2006-07 and 2007-08 at the 20% rate as a result of a claim for corresponding deficiency relief (ITTOIA 2005 s 539). HMRC opened enquiries into both returns under TMA 1970 s 9A and issued closure notices amending the rate to 40%. The First-tier Tribunal and Upper Tribunal dismissed his appeal.

The taxpayer argued that under TCGA 1992 s 6(2) when calculating his unused basic rate band for capital gains tax purposes the full amount of the corresponding deficiency relief should be deducted from his total income resulting in a negative total income figure for the purpose of s 4. This should then be deducted from the basic rate limit extending the unused basic rate band beyond the normal limit. In this way he...