Choosing the right finance structure for warehouse solar affects Year 1 cashflow, tax efficiency, and balance sheet treatment. The good news: in most cases, the structure choice doesn't change the fundamental commercial case — savings exceed finance payments from Day 1 regardless of structure. Here's how to pick the right one.
Finance lease: the standard approach
Fixed monthly payment, tax-deductible as operating expenditure. AIA claimable by lessee on most UK finance leases (HMRC treats the economic substance as ownership). Rates 2026: 5.5-7.5% effective for strong credit. Year 1 cashflow example (1 MW, £750k, 7-year lease at 5.9%): Annual payments £131,700 vs annual savings £202,500 = net Year 1 surplus £70,800 before tax. After AIA deduction (£750k × 25% = £187,500 tax saving): Year 1 benefit approximately £258,300.
Hire purchase: maximum AIA benefit
HP instalments = balance sheet debt repayment. AIA on full system cost in Year 1 regardless of HP schedule. Best when: balance sheet is neutral, maximum Year 1 tax deduction is the priority, credit strength is good.
PPA: zero capex for tenants
PPA operator owns, installs, operates. You pay per kWh at below-grid-retail tariff. Zero capex, zero maintenance. Best for: tenants with under 7 years on lease, businesses without capex approval pathway, those wanting simplicity.
Which structure is right for you?
- Owner-occupier, strong credit, wants maximum tax efficiency: **Hire purchase** - Tenant/owner-occupier, wants simplicity, cashflow positive Day 1: **Finance lease** - Tenant on short lease or no capex budget: **PPA** - Large project (£2m+), cost of capital sensitive: **Green bond** (SDCL, GLIDE — sometimes sub-5%)
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Full asset finance guide: /guides/warehouse-solar-asset-finance-guide/. Finance options compared: /guides/warehouse-solar-finance-options/. PPA guide: /ppa-for-warehouses/. Contact: /contact/.