ABSTRACT
The following statistics give some idea of the numbers involved, this being the main source of difficulty in administration. There were 26 million PAYE (pay-as-you-earn) records kept in 1975/76 (of which 1·29 million were subsidiary employments), there were 4·4 million Schedule D assessments, 478,000 corporation tax assessments and 276,000 capital gains tax assessments. The PAYE system is in some respects an extremely flexible method of collecting tax and results in roughly six out of seven cases not being altered at the end of the year. It can cope with the large number of personal allowances, which include separate allowances for single and married persons, married women's earnings, children, children of single parent families, housekeepers, dependent relatives, daughter's services, blind persons and life assurance. Deductions can also be given for mortgage interest. In addition, untaxed income (e.g. bank interest, 3! per cent War Loan interest and the national insurance pension) can be taxed by reducing the allowances to be set against the employment income. The system is a cumulative one under which each week (or month) a proportion of the allowances for the year is deducted from the aggregate pay for the year to date and the tax calculated according to tables. This is compared with the figure for tax calculated at the previous week (or month), and the difference is the tax deductible. It can therefore cater for variations in the level of pay and variations in the allowances during the year, e.g. those caused by the taxpayer having another child, taking out another life insurance policy, or moving house and
changing the amount of his mortgage payments. When an employee changes his job he takes a certificate showing the cumulative position to date, and the new employer carries on using the same figures; in this way the system caters for 10 million job changes in a year, which is 40 per cent of all PAYE records. The flexibility of the PAYE system means that the Revenue need ask a taxpayer whose circumstances are fairly simple to complete a tax return only once every five years in 60 per cent of cases.
