Buyer's guides · Funding
Should we buy commercial solar outright, finance it or sign a PPA?
Cash, asset finance or a PPA: the same system, three very different results for your balance sheet.
Written by Harry HainesCEO & Co-Founder, CH Group
Updated · 7 min read
CH Group runs controlled solar tenders for commercial sites of 100 kWp and above.
The short answer
Buying outright makes your company the owner, and hire purchase makes it the owner at the final payment, so in both cases it keeps the savings and may claim capital allowances. A power purchase agreement (PPA) moves the capital, the ownership and the allowances to a funder, and you pay a per-kWh price over a term of typically 10 to 25 years 10.
There is no national UK grant for commercial rooftop solar, and the UK Shared Prosperity Fund grant closed on 31 March 2026 8. Rooftop solar is exempt from business rates in England from 1 April 2022 to 1 April 2035 where most of the power is used on site 4. Confirm every tax point with your accountant.
Figures checked
Key numbers
| Figure | Source | |
|---|---|---|
| PPA term | Typically 10 to 25 years | Solar Energy UK |
| Hire purchase term | 3 to 7 years | Kandoo Finance, 30 May 2026 |
| Annual Investment Allowance | £1 million | GOV.UK |
| First-year allowance on solar (companies) | 50% (special rate plant, not full expensing) | HMRC HS252 |
| Writing down allowance, special rate pool | 6% a year | GOV.UK |
| Business rates exemption, England | 1 April 2022 to 1 April 2035 | VOA |
| VAT on commercial installs | 20% standard rate (0% is residential and charitable only) | HMRC Notice 708/6 |
What goes wrong, and what does it cost?
The costliest funding mistakes are assuming grants and 0% VAT that do not exist for commercial roofs, misreading the tax rules, and signing a PPA without checking its exit terms.
The board is asked to approve a funding route that nobody has tested against the savings.
- Counting on a grant. The UK Shared Prosperity Fund grant closed on 31 March 2026, and the Industrial Energy Transformation Fund closed in July 2025 with no successor planned 89. A business case that includes either has a hole in it.
- Assuming 0% VAT. The zero rate applies to residential accommodation and qualifying charitable buildings. Commercial premises pay the standard 20% 7. If your business is VAT-registered, the VAT is normally recoverable, but confirm that with your accountant.
- Treating the 50% allowance as full expensing. Companies cannot claim full expensing on solar panels. They may claim the 50% special rate first-year allowance instead, or the Annual Investment Allowance 13.
- Leasing the panels and expecting the first-year allowance. The 50% allowance is not available on plant provided for leasing 1.
Each mistake changes the payback your board sees. See the payback and ROI guide.
How do capex, asset finance and a PPA differ?
With capex you pay for the system and own it from day one, with asset finance you spread the cost over a term and usually own it at the end, and with a PPA a funder owns the system and you buy its power.
The site's own funding table sets out the structure.
- Capex. Your company pays and owns, keeps the savings and carries the performance risk.
- Hire purchase. You usually pay a deposit, then instalments, and own the system after the final payment. A lender describes allowances as potentially claimable by the buyer 12.
- Lease. If a funder leases the system to you, the funder owns it, and HMRC excludes plant provided for leasing from the 50% allowance 1. Ask your accountant how the rentals are treated.
- PPA. A developer designs, installs, owns and maintains the system. You pay a reduced tariff with no upfront capital. At the end you can usually remove, extend or buy the system 10.
In its June 2025 solar roadmap, the government said financing behind-the-meter solar is hard for businesses without strong credit ratings 14. Expect credit checks on any finance or PPA route.
How do the tax, business rates and grant positions compare?
The table below compares capex, hire purchase, leasing and a PPA on ownership, cash needed, term, tax, VAT, business rates, grants, risk and who each route suits.
Tax points are information, not tax advice. Check with your accountant before you rely on any row.
| Capex | Hire purchase | Lease | PPA | |
|---|---|---|---|---|
| Who funds and owns | You | You, after the final payment | The lessor | The funder |
| Upfront cash | Full cost | Usually a deposit | Varies by lessor; ask for written terms | None |
| Typical term | Not applicable | 3 to 7 years 11 | 5 to 10 years for an operating lease 11 | 10 to 25 years 10 |
| Tax position | Companies: Annual Investment Allowance (£1 million) 3 or 50% first-year allowance, then 6% a year 12 | Buyer treated as owner; allowances may be claimable 12 | The lessor owns the system and the 50% allowance is not available on plant provided for leasing 1; your rentals are usually deductible 11. Check with your accountant. | Funder takes the allowances; you pay for power as an operating cost |
| VAT | Standard rate (20%), not the 0% rate 7; normally recoverable if VAT-registered, check with your accountant | Same | Same | Check how VAT applies to the tariff |
| Business rates | England: exempt 1 Apr 2022 to 1 Apr 2035 where most power is used on site 4. Wales: from 1 Apr 2024, same end date 5. Scotland: newly installed systems from 1 Apr 2023, per a 2022 Solar Energy UK budget summary 6; confirm locally. | Same relief | Same relief | Same relief if most power is used on site; confirm treatment in the contract |
| Grants | No national grant; see the regional note below | As capex | As capex | Not applicable |
| Main risks | Uses capital; you carry performance risk | Deposit and interest cost | You do not own the system | Long lock-in, indexation, buyout, landlord consent |
| Best for | A profitable owner-occupier with cash and a long-term view | A business that wants ownership without paying the full cost upfront | A business that prefers a rental cost and accepts no ownership | A capital-constrained business with long tenure on the site |
Business rates relief depends on most of the power being consumed inside the property 4. An export-heavy design may not qualify.
Some regional grants exist, with caps and dates. Vale of Glamorgan's SME Low Carbon Grant pays £1,000 to £20,000 per award, up to 50% of eligible costs, for installations finished by 26 February 2027, and only for Vale businesses 15. The West Midlands BEAS 2025/26 scheme capped solar at £50,000 at 50% and closed in March 2026 16. Check any scheme's current terms before you plan around it.
What should we check before signing a solar PPA?
Before signing a solar PPA, check whether the price is fixed or indexed, how the buyout is calculated, what the system must deliver, and what happens when you sell or lease the building.
- Indexation. A PPA price may be fixed for the whole term, or escalate by a fixed annual percentage or by CPI or RPI, sometimes capped 1713.
- Buyout. One vendor recommends a fixed, declining buyout formula, written into the contract 13.
- Take-or-pay and curtailment. Know whether you pay for power you do not use.
- Sale or lease of the site. A leased or PPA system can complicate a property sale, and landlord consent is needed.
Public sources do not agree on a PPA price per kWh, and none is a primary source. Get a written quote against your own half-hourly data.
Who is each funding route not right for?
Capex is not right for a business that needs its cash elsewhere, a PPA is not right for a business that may sell or move soon, and on a leased site every route needs a lease long enough to cover the finance term or payback.
- Capex is a poor fit if the money earns more elsewhere in the business.
- Asset finance suits a business that wants to own the system but keep working capital. Interest is the price of that choice, so ask lenders for written terms.
- A PPA suits capital- or credit-constrained businesses with long tenure. It is a poor fit if you plan to sell, relocate or change the roof within the term.
Tenants should read the site suitability guide first. To compare funding quotes alongside installer quotes, use the quote comparison guide.
Illustrative example
How the capital allowance deduction differs on a £200,000 system
Assumed inputs, not a quote or tax advice: a company buys a £200,000 system outright, not for leasing 123.
- Annual Investment Allowance route: £200,000 is under the £1 million limit, so up to £200,000 is deductible in year one.
- 50% first-year allowance route: 50% of £200,000 is £100,000 deducted in year one.
- The remaining £100,000 goes to the special rate pool. At 6%, a writing down allowance of £6,000 in the same year gives £106,000 in total.
On these assumptions the two routes differ by £94,000 of year-one deductions, provided the company has not used its Annual Investment Allowance on other spending that year. The tax saved depends on your profits and rate. Ask your accountant which route applies to your company and what it is worth.
Your next steps
Get twelve months of half-hourly data Every route is only as good as the savings it is tested against.
Decide your constraints Note the cash you can commit, how long you will hold the site, and whether you own or lease the roof.
Ask your accountant about tax Confirm allowances, VAT recovery and business rates relief for your company and route.
Compare all three routes on one basis Get capex, finance and PPA terms in writing against the same system, then weigh them with your board.
How CH Group handles this
CH Group starts from twelve months of half-hourly data, runs one controlled tender to our panel of vetted installer partners, and compares every proposal on the same ten variables, including commercial terms.
Capex, asset finance and PPA are modelled side by side against projected savings built on your verified half-hourly data. CH Group's fee is agreed in writing before you commit to anything, and installer partners also pay CH Group. Every partner bids against the same brief, so no installer can buy a better place in your comparison. We do not give tax advice, and we do not promise savings. All case study results are projected.
Questions buyers ask next
Can we claim full expensing on commercial solar panels?
No. Companies cannot claim full expensing on special rate assets, including solar panels. They may claim the 50% special rate first-year allowance instead, or the Annual Investment Allowance of £1 million. Check with your accountant.
Is there a grant for commercial rooftop solar?
There is no national UK grant for commercial rooftop solar. The UK Shared Prosperity Fund grant closed on 31 March 2026. Some regional schemes exist with caps and closing dates, so check each one directly.
What happens to the system at the end of a PPA?
Solar Energy UK says that at the end of the term the customer can usually remove, extend or buy the system.
What if we sell or move the site during the term?
A leased or PPA system can complicate a sale. Ask a solicitor what the contract says about transfer, assignment and early termination before you sign.
Sources
Public figures are from the sources below, as published on the dates shown. CH Group project figures are projections supplied for each case study. This guide is general information, not financial, tax or legal advice.
- HMRC, Capital allowances and balancing charges (HS252), 2025, 6 Apr 2026.
- GOV.UK, Work out your writing down allowances: rates and pools, Accessed 13 Nov 2026.
- GOV.UK, Claim capital allowances: Annual investment allowance, Accessed 13 Nov 2026.
- VOA / GOV.UK, Rating Manual section 5a: Power generators, 6 Nov 2026.
- VOA / GOV.UK, Rating Manual section 5a: Valuation of plant and machinery, 6 Nov 2026.
- Solar Energy UK, Business rates and onsite renewables (Scotland, budget extract), 16 Dec 2022.
- HMRC, VAT on energy-saving materials and heating equipment (Notice 708/6), 31 Jan 2024.
- Enterprise Nation, Is the UK Shared Prosperity Fund replacement adequate?, 17 Mar 2026.
- DESNZ / GOV.UK, Industrial Energy Transformation Fund, 25 Jun 2026.
- Solar Energy UK, Power Purchase Agreements, Accessed 13 Nov 2026.
- Kandoo Finance, Finance for Solar & Renewables, 30 May 2026.
- Lombard (NatWest Group), Hire purchase for renewable energy, Accessed 13 Nov 2026.
- SurgePV, Solar PPA Negotiation: Key Terms for Buyers in 2026, 4 Nov 2026.
- DESNZ, Solar roadmap: United Kingdom powered by solar, 30 Jun 2025.
- Vale of Glamorgan Council, SME Low Carbon Grant Programme, Guidance notes 15 Jul 2026.
- Sustainability West Midlands, Business Energy Advice Service (BEAS) 2025/26, 16 Sep 2025.
- UrbanVolt, Solar PPA Pricing and Quantified Savings, 21 Sep 2026.
