HLC Scheme

What is it?

Under arrangements agreed with HM Revenue & Customs (HMRC) parochial clergy may receive part of their stipend paid free of tax and National Insurance in reimbursement of heating, lighting, cleaning and garden upkeep (HLC) costs.

HLC Terms and Conditions

There are strict conditions which need to be met to qualify for the scheme.

You can view the full conditions here but the main criteria are:

  • You must be a full-time office holder (either with the Freehold or under common tenure) receiving eligible funds paid through the Church Commissioners' clergy payroll.
  • You must occupy, rent-free, an official house provided by the Church of England (or a charity).

Is it paid in addition to my stipend?

No. The reimbursement is simply a reclassification of part of your stipend as tax-free rather than taxable.  We reimburse you for these costs by paying part of your stipend outside of tax and National Insurance.

How does the Scheme work?

When you take up a new appointment your HLC allowance is based on an estimated figure either from your Board of Finance (or funding body) or carried over from your previous post. If we do not receive a figure to use we will contact you for an estimate. Provisional tax-free payments are made based on the figures. The necessary adjustments are made once you confirm your actual expenditure. If you change your post we will normally carry over your previous estimate, and this will be confirmed to you.

What costs does the scheme cover?

It covers running costs of the whole house which are:

  • fuel (gas, electricity, oil, coal, wood, petrol etc.)
  • materials (polish, dusters, cleaning products etc.)
  • servicing (overhaul of central heating, vacuum cleaner, lawnmower etc.)
  • repairs (including replacement of life-expired equipment on a like-for- like basis)
  • wages (payments to a cleaner or gardener)

Important: The scheme does not cover capital costs (machinery, new or improved equipment, furniture, sheds, garden plants etc.) or depreciation.

You will need to factor in an amount for your personal costs (cooking, laundry etc) and deduct this from the total. Some energy companies have online tools which will help you to estimate these costs.

Wages may include payments made to a relative provided you can prove that they are commercially reasonable and have actually been made.

How do I report my figures?

At the end of the financial year, we will ask you to complete an Annual Return confirming your actually cost for your heating, lighting, cleaning and garden upkeep during the year and to provide an estimate of your expenditure for the coming tax year. We then compare the figures you have submitted with the estimate you were allowed in the previous year and make any necessary adjustment for any over or under-reimbursement.

Please log on to MyView to submit your HLC figures: Click here

  • An under-reimbursement is adjusted immediately,
  • Any over reimbursement is corrected by switching the amount due from the tax-free to the taxable element of your stipend in equal monthly installments over the remaining payments of the tax year. This procedure means that your tax-free payments may fluctuate whilst the adjustment is being made.

Please note we are not able to make any adjustment if you have left the payroll or are no longer in the scheme, or did not submit figures in the previous year.

What are the tax implications?

HMRC view the scheme as a benefit in kind and your tax code will be adjusted to allow for this.
Click here for further details regarding Service Benefit.
Click here for more information regarding your Tax code and HLC

What if I am not eligible?

If you are part-time or living in your own home then - as per HMRC guidelines - you are not eligible to receive the HLC allowance. You are, however, still able to claim tax relief on any work related heating, lighting, cleaning and garden upkeep expenses through the Ministers of Religion tax return under other expenses.

I missed the deadline to submit my actual expenditure is there anything I can do?

The agreement with HMRC is that you must submit an actual expenditure figure to the Commissioners each year. If you miss the deadline we are unable, under the rules laid down by HMRC, to give you any tax-free adjustment for that year. You may, however, claim a discretionary "Study Allowance" for the amount of unreimbursed expenditure from the Revenue. The Study Allowance normally amounts to 25% of the total claim and you should enter this sum at box 25 on the Ministers of religion page of your tax return for that year.

What about Licensed Layorkers?

Currently the HLC arrangements described above do not apply to licensed layworkers. However we are in discussion with HMRC regarding this issue and are asking them to look into these cases.