Once the Kyuubi's chakra came into play, he automatically lost the fight. A kid can't possibly defeat another kid with Bijuu enhancements unless his name is Sasuke.
He deactivated his byakugan because at that point of time Naruto was a weak kid with main character status plastered over him and could not win a fight wo plot.
You can clearly see that Neji deactivated Byakugan at the end of the fight. He was absolutely sure he had already won the battle and got careless... which led him into losing the match.