Distribution warehouse: 150 kWp on six-year hire purchase, own it at the end

A third-party logistics operator running a large distribution shed with continuous daytime activity, chilled bays, conveyors, forklift charging and heavy lighting, wanted to bring down a substantial energy bill without a six-figure cash outlay. It funded a 150 kWp rooftop system on a six-year hire-purchase agreement, spreading the cash while still claiming the full first-year tax relief up front.

The funding structure

Under hire purchase the operator put down a modest deposit and paid fixed monthly instalments that include interest. The lender holds legal title until the final payment, but for tax the business counts as the owner from day one, so it claimed the capital allowance on the whole cost in year one even though it pays over six years. At the end of the term ownership passes across for a nominal fee and the payments stop for good.

At an indicative 2026 cost of around £850 per kWp for a system of this size, the 150 kWp array came to roughly £127,500 before VAT, which the VAT-registered business reclaimed. Spread over a six-year term at an indicative rate of base plus margin, the agreement costs about £23,400 a year, or roughly £1,950 a month.

The numbers

The system generates around 142,500 kWh a year. With the warehouse worked hard through the day, self-consumption sits near 70%, so roughly 99,750 kWh is used on site displacing grid power at 28p a unit, worth about £27,930. The remaining 42,750 kWh is exported under the Smart Export Guarantee at an indicative 15p, adding about £3,700. Together that is a gross annual benefit near £31,600.

Set the roughly £1,950 monthly instalment, about £23,400 a year, against the £31,600 annual benefit and the project is cash-positive by around £8,200 a year across the whole six-year term, before tax relief. The full cost fell under the £1m Annual Investment Allowance, so the operator claimed 100% first-year relief and, at 25% corporation tax, recovered roughly £31,900 against its year-one tax bill. Counting that relief against the net cost, the effective payback comes in at about four years.

When the six years end, the finance cost disappears entirely and the operator owns a system with fifteen or more years of generation left, all of it now flowing straight to the bottom line.

Why this route suited them

Hire purchase is the popular middle path for owners who want the asset and the relief but not the cash hit, and it fitted this business precisely. A 150 kWp system is a serious capital item, and the operator preferred to keep its cash and its overdraft free for stock, vehicles and the ups and downs of a logistics operation. Hire purchase let it do that while still treating the system as owned for tax, so it captured the full year-one allowance immediately rather than dribbling relief out over a lease. The monthly payment sits well below the monthly saving, so the roof pays the finance and then some, and at the end the business owns the array outright. For a capital-heavy asset on a settled building, it is hard to beat.

Model this against your own electricity spend in the finance calculator, then get costed quotes when you are ready.