In A Scott v HMRC [2018] UKUT 236 (17 July 2018) the UT found that corresponding deficiency relief (CDR) which has the effect of reducing the rate of CGT from higher rate to basic rate is limited by the ‘negative income argument’.
The appeal related to the rate of capital gains tax that should be applied to Mr Scott’s capital gains for the 2006/07 and 2007/08 tax years. In these years he had claims for CDR under ITTOIA 2005 s 539 which exceeded both his income and capital gains. The issue was how TCGA 1992 s 4 should determine the rate of tax to be charged on the gains. Mr Scott claimed that the applicable rate was 20% whilst HMRC considered that the rate was 40%.
The UT observed that where reliefs and allowances are available as deductions from income the amount deducted...
