How UK businesses finance a commercial battery

A commercial battery is usually bought outright, financed, or supplied under a contract that spreads the cost. Our guide to financing commercial batteries lists the routes in a paragraph each. This post takes the same four routes and answers the three questions that decide which one suits a business: who owns the battery, who claims the capital allowances, and how it appears in the accounts.

It is general information, checked against the sources linked at the foot on 7 October 2026. It is not financial or tax advice, and it names no lender because none is recommended here.

The four routes at a glance

The last row is the one to read carefully. A service contract in which you pay for stored energy or a result is a different animal from one in which you have the exclusive use of a specific battery, and accounting rules can treat the second as a lease.

Hire purchase and loans

Under a hire-purchase contract, the person entitled to the benefit of the contract is treated for capital allowances as the owner of the plant, and as having incurred the expenditure when it is brought into use (section 67 of the Capital Allowances Act 2001, subject to the conditions in that section). In practice the hirer claims the allowances on the full cost from the start, even though the payments run over several years. Because the Annual Investment Allowance can cover the cost up to £1 million a year, a business can take a 100% deduction in year one and still pay for the battery over time. Our tax guide shows the rates and the limits.

A bank loan has the same result for allowances: you own the battery and claim them. Lenders can use the Growth Guarantee Scheme, in which the government guarantees 70% of the lender’s outstanding balance after recovery, the borrower stays fully liable, term loans and asset finance run from three months to six years, and the maximum is £2 million per business group. It is open to smaller businesses with turnover up to £45 million. The British Business Bank has announced longer terms and a higher turnover limit, so ask the lender for the terms that apply now. The scheme makes borrowing easier to obtain. It does not reduce what you pay back.

Leases

A lease changes who is entitled to the allowances. For tax, HMRC distinguishes a funding lease, broadly one accounted for as a finance lease or one that recovers most of the asset’s value or runs for most of its useful life, from other leases. A funding lease that is not a short lease is a long funding lease, and under HMRC’s guidance the lessee is then treated as having incurred the expenditure and as owning the asset (CA23810). Whether a given lease counts as short or long turns on its term and on tests in the legislation, so ask your adviser to classify it before you sign. Under an ordinary operating lease the lessor owns the asset and claims any allowances, and you deduct the rentals.

Two further points for lessees:

• First-year allowances exclude leased-out plant. The 50% first-year allowance is not available for plant bought to lease to someone else, apart from background plant in a building. A lessor therefore generally cannot use it on a battery it leases to you.
• Accounting changed in 2026. The Financial Reporting Council’s amendments to FRS 102 apply to accounting periods beginning on or after 1 January 2026. They remove the operating and finance lease distinction for lessees, who must recognise a right-of-use asset and a lease liability for most leases. Short-term leases and leases of low-value assets are exempt (FRC explainer, June 2026). A lease no longer keeps a battery off your balance sheet if you report under FRS 102.

Service contracts

Some providers own and operate the battery on your site and charge for the service, sometimes as a share of the savings. There is no standard form, so the questions matter more than the label:

1. Is the battery for your exclusive use? If so, ask your accountant whether the contract contains a lease.
2. Who claims the capital allowances, and is the price based on the provider having them?
3. What happens at the end of the term: removal, transfer, renewal price?
4. What are the provider’s obligations if the battery under-performs, and how are they measured?
5. What happens if you sell or move out of the site?

Compare the total, not the monthly figure

Whatever the route, compare the total you will pay with the cash price and with what the tax relief is worth. Here is the arithmetic, using invented round numbers for illustration only. They are not a quote and not a typical rate.

The cost of finance is real, and so is the tax saving, which a hirer can claim up front. Putting the two side by side is what shows whether financing makes sense for your business. The same exercise for a lease needs the rentals, the end-of-term terms and a view on who gets the allowances.

Questions to ask a funder

1. What is the total I pay over the term, and what is the cash price?
2. Who claims the capital allowances under this structure?
3. Is this a lease for accounting purposes, and how will it appear in my accounts?
4. What are the early-settlement and default terms?
5. Is there any guarantee or security required from me personally, and is the Growth Guarantee Scheme being used?
6. What happens to the battery, the warranty and any monitoring contract if the funder or the installer fails?

Compare these on your own numbers: start from the savings your half-hourly data supports and the published cost ranges, and a funder or your accountant can then build the financing on top of it. For the sources of cost ranges, see our guide to commercial battery storage cost.

Sources

• Capital Allowances Act 2001, section 67
• HMRC Capital Allowances Manual, CA23810 on long funding leases and the lessee
• GOV.UK, 50% first-year allowances guidance
• GOV.UK, Annual Investment Allowance
• Financial Reporting Council, FRS 102 explainer on the Periodic Review 2024 changes (June 2026)
• British Business Bank, Growth Guarantee Scheme