Refinance & Sale-and-Leaseback for commercial solar

Most solar finance is about funding a new system. Refinance and sale-and-leaseback do the opposite: they release the capital tied up in a system you’ve already paid for, so you can put that money to work elsewhere while the panels keep generating on your roof.

How sale-and-leaseback works

The mechanics are straightforward. You sell your existing, owned solar system to a funder for a lump sum, then lease it straight back. You receive the cash; the funder takes ownership of the asset; you keep using the system and the electricity it produces. In effect you convert an illiquid asset back into working capital while keeping the operational benefit.

It suits businesses that bought solar early with cash and now want that capital available for the next investment — a second roof, battery storage, EV charging, or something unrelated to energy entirely.

What the funder checks before buying your system

Buying a system that is already installed is different from funding a new one: the funder is taking on an asset with a history, so it wants evidence that the asset is what you say it is and will keep generating. Having these ready shortens the process considerably:

• Proof of ownership and what you paid. The installer’s invoice and confirmation that the system is owned outright — or, if there is finance outstanding, a settlement figure from the existing lender, because the funder will need that security released.
• Installation and certification records. The commissioning paperwork and the installation’s certification, such as the MCS certificate where the system has one.
• The grid connection. The notification or connection agreement with your distribution network operator, made under the G98 or G99 process depending on the system’s size.
• Generation history. Monitoring or inverter data showing what the system has actually produced, so the funder can compare real output with what was forecast.
• Warranties. The panel and inverter manufacturers’ warranties, and whether they transfer to a new owner.
• Roof and site rights. If you lease the building, the landlord’s consent and the rights the funder will need to access the system — and, if the lease ended, to remove it.
• Maintenance and insurance. Service records and the current insurance, because both protect the asset the funder is buying.
• Any grant conditions. If a grant paid for part of the system, its offer letter — some grants restrict a sale or change of ownership for a set period.

How much capital can you release?

There is no fixed percentage, because the price is the funder’s valuation of the system you own today, not what you originally paid. The main things that move that valuation are:

• Remaining useful life. A younger system has more years of generation left to underwrite.
• Track record. A system with clean monitoring data that has met its forecast is easier to value than one without history.
• Condition and upcoming costs. An inverter nearing replacement, or visible degradation, reduces what a funder will pay.
• What is still owed. Any outstanding finance is settled from the proceeds, so you release the equity above that settlement figure, not the gross price.
• What you keep after tax. Depending on the lease type, selling the asset can trigger a balancing charge or restrict your rental deductions, which changes the cash that effectively stays with the business.

We work through these drivers in more detail in how much capital can you release from a solar system you already own.

Worked example

This is a hypothetical example to show how the cash flow and the tax interact — it is not a real transaction, and the figures are illustrative and rounded. Suppose a business paid cash for a 380 kW rooftop system two years ago at around £420,000, claimed the Annual Investment Allowance on it, and now wants to fund solar on a second site without borrowing fresh capital. A funder buys the existing system and leases it back.

• Capital released: assume the funder’s valuation comes in at £420,000 — in practice a used system often values below its original cost.
• Lease-back term: 6 years (72 months).
• Indicative rental: roughly £7,050 a month — about £84,600 a year — at an illustrative rate.
• Energy the system offsets: around 360,000 kWh a year, largely self-consumed on site, worth in the region of £85,000 a year in avoided grid electricity at an assumed blended price.
• Cash flow during the lease: the rental broadly uses up the energy value you already get as the owner — the £420,000 is effectively paid for with about £507,600 of rentals over six years.
• Year-one tax effect (25% corporation tax): this turns on the lease type. Rentals like these repay the full £420,000 plus interest, which makes this a finance leaseback, and UK tax rules treat that as a long funding lease. The business is treated as still owning the system: the £420,000 disposal value is matched by leaseback expenditure capped at the same amount, with no Annual Investment Allowance, so little or no net balancing charge arises. But only the interest element of the rentals is deductible — roughly £25,000 in year one on these figures, worth about £6,300 of tax. If the funder instead kept the residual value under an operating leaseback, the rentals would be lower and fully deductible, but the disposal value could produce a balancing charge of up to £420,000 — about £105,000 of tax.

The headline is £420,000 released today for about £507,600 of rentals over six years, and the tax result depends on the lease type — which is exactly why this route should be modelled against a straight refinance before committing to either.

The UK tax rules most guides skip

Much of what is written about solar sale-and-leasebacks describes US rules, and the UK rules are different. This is the route where structuring matters most, so your accountant should be involved from the start.

• Selling is a disposal. When you sell the system you cease to own it, so a disposal value is brought into your capital allowances computation — broadly the sale price, capped at what you originally paid for the asset.
• The allowance you claimed, and the type of leaseback, decide the charge. If you claimed the Annual Investment Allowance, the disposal value is deducted from your special rate pool, and anything above the pool balance becomes a balancing charge. If you claimed the 50% first-year allowance, a specific rule charges half the disposal value immediately (where the allowance covered the full cost) and deducts the other half from the pool. Under a finance leaseback, the long funding lease rules below usually offset most of this.
• The funder’s allowances are restricted. The Capital Allowances Act 2001 contains specific rules for sale-and-leaseback transactions that can limit the allowances the funder may claim, which is one reason the funder’s pricing is not simply the market value of the equipment.
• The lease type matters. A sale and finance leaseback — where the rentals repay the full value plus interest — is a long funding lease for tax, whatever its length. You are treated as still owning the system: allowances are capped at your disposal value, with no Annual Investment Allowance or first-year allowance, and only the interest element of each rental is deductible. An operating leaseback of seven years or less is not a long funding lease: you deduct the rentals, and any allowances sit with the funder, subject to the restrictions above.
• VAT. If you are VAT-registered, selling the system to the funder is normally a standard-rated supply, so you charge VAT on the price and account for it. The rentals you then pay carry VAT, which you can normally reclaim if the system supports taxable business activity.
• Grant clawback. If the original system was part grant-funded, the grant may carry clawback terms triggered by a change of ownership. We review the conditions before structuring anything — see our grants and funding guide.

The accounting position

Sale-and-leaseback was once used to take an asset off the balance sheet. Under the revised FRS 102, for accounting periods beginning on or after 1 January 2026, most leases sit on the lessee’s balance sheet as a right-of-use asset with a matching lease liability, so the benefit today is mainly liquidity rather than a lighter balance sheet. Your accountant will also need to confirm how the transaction itself is accounted for, which depends on its terms.

Refinance as an alternative

If a full sale-and-leaseback isn’t the right fit, a straight refinance — borrowing against the value of the owned system via a secured facility — can release capital without disposing of the asset, which avoids the balancing-charge question altogether. Which is better depends on your tax position, your balance sheet and how much capital you need to free. We model both.

Sale-and-leaseback vs refinance at a glance

Both routes free capital from a system you already own, but they treat ownership, tax and your balance sheet differently.

	Sale-and-leaseback	Refinance (secured loan)
Ownership	Funder buys the system; you lease it back	You keep ownership throughout
Capital allowances	The sale is a disposal; a finance leaseback keeps you claiming (capped, no AIA), an operating leaseback moves the claim to the funder	No disposal; your existing position is unchanged
Balance sheet	Under revised FRS 102 most leases sit on the balance sheet (periods from 1 January 2026)	Asset stays on your books; the facility is added as a liability
VAT	The sale is normally standard-rated if you are VAT-registered; rentals then carry VAT	No sale of the asset, so no VAT on a disposal
Balancing charge	Likely with an operating leaseback; usually offset under a finance leaseback	Avoided, because there is no disposal
Best for	Releasing the full asset value when the numbers beat a refinance	Keeping ownership and sidestepping a balancing charge

For the allowances detail behind this, see our capital allowances guide.

When this route is NOT the right choice

Sale-and-leaseback earns its keep when you have a concrete, higher-return use for the freed capital — a second installation, storage, an acquisition. If you don’t yet have somewhere productive to put the money, the cheapest position is simply to keep owning the system outright: hold it as a capital purchase and revisit later. And where the tax cost of the sale would be large relative to the cash you actually need, a straight refinance usually wins, because it releases capital without a disposal. We only recommend a sale-and-leaseback when the numbers beat both of those alternatives.

Who this suits

Refinance and sale-and-leaseback work best for businesses that:

• already own a solar system outright (typically bought with cash);
• want to release that capital for another investment without losing the system; and
• have an accountant available to confirm the tax treatment and any grant conditions.

If you’re funding a new system rather than releasing capital from an existing one, start with hire purchase, a finance lease or an equipment loan instead.

Common questions

Will a sale-and-leaseback affect my energy savings or export income?

Your on-site savings continue, because you keep using the electricity the system produces. Export income is a matter for the lease: once the funder owns the system, who receives Smart Export Guarantee payments — and whether the arrangement with your electricity supplier needs updating — is set by the agreement, so check it before you sign. Either way this is very different from a power purchase agreement, where a third party owns the system and you buy the power from them. Our asset finance vs PPA comparison sets out who keeps what under each.

Can I release capital from a solar system that still has finance owing on it?

A sale-and-leaseback needs the existing lender’s security released, so any outstanding hire purchase or loan has to be cleared. In practice the remaining balance is settled from the sale proceeds and you receive the equity above it. If most of the value is still financed, refinancing the existing agreement is usually the better route.

Is a solar sale and leaseback the same as a PPA?

No. In a sale-and-leaseback you sell a system you already own and lease it back, so you keep using it under a finance agreement. In a power purchase agreement a third party installs or owns the system from the start and sells you the electricity; you never owned the asset and there is no capital to release.

Release the capital in your system

Tell us about the system you own — size, age, what you paid, whether finance is outstanding and whether any grant was involved — and we’ll model both sale-and-leaseback and refinance, with the tax position checked alongside your accountant. Request a quote to get started.