Sustainability business loans — Capital allowances & full expensing for financed green assets

Planning to finance solar, EV chargers, heat pumps or other energy‑efficient assets? This page explains, in plain English, how capital allowances and the current full expensing rules apply when those assets are bought using finance — and how to make sure your finance structure lets you claim the tax relief you expect. Get Quote Now — Free Eligibility Check (no obligation; we do not lend).

Quick summary — how capital allowances and full expensing work for financed energy‑efficient assets

Short answer: tax relief depends mainly on who has tax ownership of the asset, not simply on how you pay for it. If your company is the owner for tax purposes (e.g., via a hire purchase or purchase outright), you can normally claim capital allowances — including the current full expensing where the asset qualifies — in the tax year the asset is brought into use. If ownership remains with the lender/lessor (common in operating leases), the lessor usually claims allowances and you deduct rentals as a revenue expense instead.

Free Eligibility Check — Get Quote Now (no obligation). We don’t provide loans — we connect you with lenders and brokers who can quote for projects from around £10,000 upwards.

Key definitions: capital allowances, full expensing, qualifying assets and tax ownership

What are capital allowances?

Capital allowances let businesses relieve the cost of qualifying plant and machinery against taxable profits. Instead of treating a purchase as an allowable revenue cost, the tax system gives a capital deduction over time (writing down allowances) or in certain cases immediately.

What is full expensing?

Full expensing (temporary regimes can change — check current HMRC guidance) allows a company to deduct 100% of the cost of qualifying main‑rate plant & machinery from taxable profits in the year the asset is brought into use. It’s powerful — but only for qualifying assets and for the business that has tax ownership.

What counts as an energy‑efficient asset?

Examples commonly claimed as sustainability investments: commercial solar PV, EV chargers and related distribution, battery storage, commercial heat pumps, LED lighting upgrades, efficient HVAC systems and energy‑saving production plant. Qualification depends on technical characteristics and how HMRC defines plant & machinery.

Who “owns” the asset for tax purposes?

Tax ownership isn’t just legal title. HMRC looks at who bears economic risk, who has rights and obligations (insurance, maintenance, obsolescence), and who benefits from the asset. For example, in a hire purchase the purchaser normally becomes the tax owner once substantially all payments are made or legal title passes — so they can usually claim allowances.

How does buying on finance change capital allowances / full expensing?

Hire purchase and conditional sale

When you finance via hire purchase (HP) and the business is put on your balance sheet, you typically have tax ownership and can claim capital allowances or full expensing (if the asset qualifies). The key is that the asset is treated as your company’s asset for tax.

Finance lease vs operating lease

Finance (capital) leases often transfer risks and rewards and can be treated like HP — lessee may claim allowances. Operating leases usually leave ownership with the lessor; the lessor claims capital allowances while you deduct lease payments as a revenue expense. The contract terms determine treatment — read them closely.

Who decides?

Deal documentation and economic substance decide tax ownership. Sometimes lenders or lessors create structures where they claim allowances to improve their tax position — that’s legitimate, but it changes who benefits from full expensing.

Timing of the claim

If you are the tax owner, you generally claim in the tax year the asset is brought into use. Financing repayment profiles do not change that timing — it’s about ownership and use, not when payments are made.

Practical examples: solar arrays, EV chargers and other common projects

These simplified scenarios illustrate common outcomes. Always run the numbers with your accountant.

1. Commercial solar PV bought via hire purchase

• Structure: Hire purchase where the company is on balance sheet and legal title transfers.
• Tax treatment: Company is tax owner — may claim full expensing (if the asset meets qualifying rules) in year 1.
• Practical impact: Cost of £50,000 could reduce taxable profit by the same amount in year 1, subject to profit availability and other rules.

2. EV chargers supplied under an operating lease

• Structure: Supplier retains ownership; business pays periodic rentals.
• Tax treatment: Lessors usually claim capital allowances; your business treats payments as deductible revenue costs.
• Practical impact: You get predictable rental deductions but not the immediate capital allowance benefit.

3. Battery storage and mixed systems

• Many installations combine qualifying and non‑qualifying elements. Apportionment may be needed and some parts may attract special reliefs.
• Work with installers and accountants to separate qualifying P&M costs from building fabric or non‑qualifying items.

4. Tenant installs equipment in leased premises

Check lease terms: installing equipment does not automatically give you ownership for tax. Ensure agreements document who owns and will be treated as owner for tax purposes.

Quick tip: Always confirm who the tax owner is in your finance agreement before assuming you can claim full expensing.

Which types of finance give the business the right to claim allowances?

• Hire Purchase / Conditional Sale: Usually favourable for claiming allowances because ownership for tax passes to the buyer.
• Finance (Capital) Lease: May be treated like ownership where risks and rewards transfer; lessee can often claim.
• Operating Lease / Rental: Less common for claimants — lessor typically claims allowances.
• Sale & Leaseback: Can shift who claims allowances — beware if you claimed relief previously.
• Vendor finance & grants: Grants typically reduce qualifying cost; vendor finance terms may affect ownership — disclose all grant support to your accountant.

Checklist to discuss with lenders or brokers: who has legal title and tax risk, who insures and maintains the asset, how the contract treats end‑of‑term options, and whether any grants are attached.

How lenders and brokers view capital allowances — and why it matters for your deal

Lenders consider security, residual value and cashflow. Some lessors structure deals to retain claim to allowances; others allow the borrower to be tax owner. Brokers can match finance types to your tax objectives — for example, matching you to HP when you want to claim full expensing. UK Business Loans connects you with brokers and lenders who understand sustainability projects and the tax nuances involved.

sustainability loans are a common search; if you want tailored quotes for green upgrades, Get Quote Now — Free Eligibility Check.

What to do next — a practical checklist

• Confirm the asset’s technical specs to check if it meets qualifying rules for full expensing.
• Clarify tax ownership in the finance contract — who bears risk and who has title?
• Ask your installer/vendor for a cost breakdown so qualifying items can be identified.
• Consider grants and whether they reduce the claimable cost.
• Run a cashflow vs tax comparison with your accountant — HP vs lease has different effects.
• Get matched with lenders/brokers who specialise in sustainability projects — Start your free eligibility check (no obligation).

Frequently asked questions

Can I claim full expensing if I finance solar panels?

Usually yes if your company is the tax owner and the solar installation meets qualifying rules. Confirm with your accountant and request technical details from the supplier.

If my finance is a lease, who can claim capital allowances?

It depends. Operating leases → lessor usually claims. Finance leases or HP where ownership economically transfers → lessee may claim.

Does receiving a grant stop me claiming allowances?

Often grants must be deducted from the qualifying cost, reducing the amount you can claim. Check grant terms and HMRC guidance.

Are EV chargers automatically qualifying plant & machinery?

Many are, but technical specs and use determine qualification. Check manufacturer details and HMRC guidance.

Will claiming full expensing affect loan approval?

Lenders may welcome the cashflow benefit of tax relief, but you should disclose any expected relief so lenders can assess affordability accurately.

Where do I get professional advice?

Speak to your accountant or tax adviser for definitive tax treatment. If you want finance quotes, Get Quote Now — Free Eligibility Check and we’ll match you to brokers/lenders experienced in sustainability projects.

Summary — finance, tax relief and your next step

Ownership and the specific finance structure determine who claims capital allowances or full expensing. Full expensing can deliver significant immediate tax relief, but only if the asset qualifies and your business is the tax owner. Before agreeing finance, confirm ownership, apportion costs for mixed installations, and discuss implications with your accountant. For quick, no‑obligation quotes from lenders and brokers who handle sustainability projects (loans and finance from around £10,000+), Get Quote Now — Free Eligibility Check.

UK Business Loans introduces businesses to lenders and brokers; we do not lend or provide regulated tax or financial advice. For specific tax treatment contact your accountant or HMRC. Our service is free and there’s no obligation when you complete the enquiry form.

1. Can I claim full expensing on solar panels bought with finance?
– Usually yes if your company is the tax owner (for example under hire purchase or a finance lease treated as ownership) and the solar installation meets HMRC’s qualifying rules — confirm with your accountant.

2. Which finance types let my business claim capital allowances on green assets?
– Hire purchase and finance (capital) leases commonly allow the business to be treated as tax owner and claim capital allowances, whereas operating leases typically leave the claim to the lessor.

3. Will expected tax relief from full expensing affect my business loan approval?
– Lenders may view the cashflow benefit of tax relief positively, but you should disclose expected relief and lenders will still assess affordability, security and creditworthiness.

4. Do EV chargers qualify for capital allowances or full expensing?
– Many EV chargers qualify as plant & machinery and can attract capital allowances or full expensing if they meet technical criteria — check manufacturer specs and HMRC guidance.

5. How do government grants or vendor contributions affect my capital allowance claim?
– Grants or vendor contributions usually reduce the qualifying cost subject to capital allowances, so you must deduct grant amounts and discuss implications with your advisor.

6. Can UK Business Loans match me with lenders who specialise in sustainability loans and asset finance?
– Yes — UK Business Loans connects you, free and no-obligation, with vetted brokers and lenders experienced in sustainability projects and asset finance.

7. If I sign an operating lease for EV chargers, who claims the tax relief?
– Under an operating lease the lessor typically retains tax ownership and claims capital allowances while you deduct rental payments as a revenue expense.

8. When can I claim capital allowances after installing financed equipment?
– If your company is the tax owner, you normally claim capital allowances (including full expensing where eligible) in the tax year the asset is first brought into use, regardless of the repayment schedule.

9. What should I ask my installer or supplier to support a full expensing claim for a mixed installation?
– Request a detailed cost breakdown separating qualifying plant & machinery from building fabric and non‑qualifying items so your accountant can apportion and confirm eligibility.

10. What information do lenders and brokers need to quote for a sustainability business loan?
– Lenders typically want the project cost and cost breakdown, preferred finance type (HP/lease), any grants, business financials, and basic credit and company details to provide tailored quotes.