Commercial Solar Finance: How a Business Can Pay for Solar

Four ways to pay for commercial solar

Paying cash

Buying outright gives the business every unit the panels make and the full tax relief. Solar panels are special rate plant (HMRC CA22335), and the Annual Investment Allowance lets a business deduct up to £1 million of qualifying spending in the year (GOV.UK). For a profitable business, that relief shortens the payback. See capital allowances on solar panels and commercial solar payback.

The cost is the cash leaving the business on day one, which is why many owners compare it with finance rather than with doing nothing.

Business loans and green loans

With a loan, the business still buys and owns the panels, so the tax position is the same as paying cash; the bank is lending money, not owning the system. What matters is whether the yearly saving comfortably covers the repayments.

• Wales. The Development Bank of Wales' Green Business Loan Scheme lists solar PV among the typical projects it funds, with discounted fixed rates and a term linked to the project's payback. Applicants must be based in Wales and have traded for at least two years with filed accounts (Development Bank of Wales).
• Scotland. The SME Loan Scheme offers interest-free loans of £1,000 to £130,000 for energy measures, but its FAQs say it is not accepting new applications for solar PV (Business Energy Scotland). See solar support in Scotland.
• Banks. Several high street and specialist lenders offer green or sustainability loans. Terms vary by lender, so compare the rate, the term and any security asked for.

Asset finance: hire purchase and leasing

Hire purchase. You pay instalments and own the panels at the end. Section 67 of the Capital Allowances Act treats a business that will or may become the owner under the contract as the owner while it has the benefit of the contract, with special rules where the contract is accounted for as a lease (section 67). So the business can often claim the allowances from the start.

Leasing. The finance company owns the panels and rents them to you. Capital allowances normally stay with the owner (section 11), and plant bought for leasing is excluded from full expensing and the 50% first-year allowance (HMRC CA23174AC). Check what happens at the end of the term: whether you can buy the panels, extend, or must hand them back.

The way an agreement is accounted for decides the tax answer, so ask your accountant before you sign.

PPA: no upfront cost

Under a rooftop power purchase agreement, a provider finances, installs and maintains the panels and your business buys the electricity at an agreed rate. Solar Energy UK says the customer pays no upfront capital, contracts usually run for 10 to 25 years, and at the end the customer can remove the system, extend or buy it (Solar Energy UK). The provider owns the panels, so the tax relief is theirs. Full detail: solar PPAs for businesses.

Which route suits your business

• Profitable, with cash or borrowing capacity. Buying (cash or loan) usually gives the most back, because you keep every unit and the tax relief.
• Wants to spread the cost but own the panels. Hire purchase.
• No appetite for capital spending or maintenance. A lease or a PPA, accepting a long contract and giving up the tax relief.
• Renting the building. Any route needs the landlord's consent, and a long contract needs a lease long enough to match. See solar on leased property.
• A charity or not-for-profit. Capital allowances are worth less without taxable profits, so a PPA or a loan may compare better.