Information	Where to find us
Media Centre	Home

home / information / clergy payments department / your stipend / tax & n i / tax free allowances / hlc adjustment example

Back to main menu

Back to Tax-free Allowances

Tell us what you think about our website

HLC Adjustment Example

Below is an example of how to work out HLC adjustments over several years.

The tax-free allowance made for heating, lighting, cleaning and garden upkeep expenses is based on a series of retrospective adjustments. For instance, the actual expenditure recorded on your annual return form for the year 1998/99 is used as an estimate for the year 1999/2000. The estimate is adjusted in 2000/2001 by the amount actually spent in 1999/2000, and in turn that figure is used as an estimate for 2000/2001.

The figure for 1999/2000 is calculated as follows:

	£
Actual expenditure for year 1997/98 (used as estimate for 1998/99)	2,025
Actual expenditure for year 1998/99 (based on Annual return form received June 1999)	2,625
Difference (added to expenditure for 1998/99)	+600
Total allowance for year 1999/2000:	3,225

Monthly Allowances

April 1999 (2,025/12)	168.75
May	168.75
June (return received): June (2,625/12)	218.75
Plus under expenditure	600.00
Plus April and May underpayment (218.75 – 168.75 (2,025/12) x 2 = 100)	100.00
Total for month of June	918.75

July 1999 to March 2000 (2,625/12) = 218.75 per month.

Total for year 1999/2000 = 3,225 – This is the figure that would appear on your P60 for 1999/2000.

The figure for 2000/2001 is calculated as follows:

	£
Actual expenditure for year 1998/99 (used as estimate for 1999/2000)	2,625
Actual expenditure for year 1999/2000 (based on Annual return form received June 2000)	1,985
Difference (deducted from expenditure for 1999/2000)	-640
Total Allowance for year 2000/2001	1,345

Monthly Allowances

April 2000 (2,625/12)	218.75
May	218.75
June (Return received): June (1,985/12)	165.42
Minus adjustment for over expenditure in April and May (218.75 (2625/12) – 165.42 (1985/12) = 53.33 x 2 = 106.66)	-106.66
Minus difference of 640 divided over remaining months of year (640/10)	-64.00
Total for month of June	-5.24

July 2000 to March 2001 (165.42 (1,985/12) – 64.00) = 101.42 per month

Total for year 2000/2001 = 1,345.04 – This is the figure that will appear on your P60 for 2000/2001.

The figure for 2001/02 is calculated as follows:

	£
Actual expenditure for year 1999/2000 (used as estimate for 2000/2001)	1,985
Actual expenditure for year 2000/2001 (based on Annual return form received June 2001)	3,050
Difference (added to expenditure for 2000/2001)	+1,065
Total Allowance for year 2001/2002	4,115

Monthly Allowances

April 2001 (1,985/12)	165.42
May	165.42
June (Return received): June (3,050/12)	254.17
Plus under expenditure	1,065.00
Plus April and May underpayment (254.17 – 165.42 = 88.75 x 2 = 177.50)	177.50
Total for month of June	1,496.67

July 2000 to March 2001 (3,050/12) = 254.17 per month

Total for year 2000/2001 = 4,115.04 – This is the figure that will appear on your P60 for 2001/2002.

Although we are able to make such allowances free of tax at source, in most cases they are subsequently subject to tax as benefit-in-kind. Anyone who earns more than £8,500.00 p.a. has to pay tax on any benefits-in-kind he receives. The rules governing the calculation of tax on benefits-in-kind are quite complicated, but broadly mean that approximately 75% of the tax initially saved is later taken back through an adjustment to the tax code. This is due to the fact that the Revenue regards 75% of the house as being for private use and 25% for office use. Only office expenses are allowable tax-free.