An amount of corresponding deficiency relief could not exceed the taxpayer’s income, and the taxpayer’s unused basic rate tax band could not be extended for the purposes of determining the rate of capital gains tax on chargeable gains.   

The appellant claimed corresponding deficiency relief (CDR) (under ITTOIA 2005, s 539) for 2006/07 and 2007/08. The appellant’s accountants prepared his tax return for 2006/07 using third-party software, which extended the appellant’s basic rate band when calculating the tax due as a result of CDR. HM Revenue and Customs (HMRC) accepted that this reduced the appellant’s income tax liability. However, a dispute arose about the effect of TCGA 1992, s 4 in determining the rate of tax to be charged on the appellant’s chargeable gains.

Following an enquiry into the appellant’s tax return for 2006/07,