Full Expensing for office solar capex

Full Expensing was introduced in March 2023 as a temporary measure and made permanent in 2024. For limited companies (not partnerships or sole traders), it provides a 100% first-year deduction on qualifying main-pool plant and machinery, and a 50% first-year deduction on special-rate pool assets.

Solar PV typically falls into the special-rate pool — meaning Full Expensing delivers a 50% deduction in year one with 6% writing-down allowance thereafter. For a £300,000 office solar install at 25% corporation tax, FE delivers £37,500 of year-one tax relief, with further relief tapering over subsequent years.

For most UK office solar projects, AIA is more valuable than FE because (a) the 100% deduction is stronger than FE's 50% on special-rate pool, and (b) AIA can be claimed alongside other reliefs. Limited companies typically only use FE when their £1m AIA allowance is exhausted by other purchases in the same year.

Combined AIA + FE strategy: for businesses with multiple major capex purchases, the optimal stack is to apply AIA to the highest-relief assets (typically equipment with shorter writing-down lives) and FE to remaining assets. We work with your tax adviser to confirm the optimal claim strategy as part of the proposal.

Full Expensing vs AIA: which is better for office solar?

For most UK office solar projects in 2026, AIA delivers greater year-one relief than Full Expensing. Here's why: solar PV falls into the Special Rate Pool (SRP), and Full Expensing provides only a 50% first-year allowance on SRP assets. AIA provides a 100% first-year allowance on the same assets, up to the £1m cap. The difference is significant on a typical install.

On a £300k office solar project:

• AIA route: £300k × 100% × 25% CT rate = £75,000 year-one tax saving
• FE route: £300k × 50% × 25% CT rate = £37,500 year-one tax saving; remaining 50% at 6% WDA thereafter

The 25-year cumulative relief is identical — both routes eventually deduct 100% of the asset cost. But AIA delivers the relief ~15 years earlier, dramatically improving NPV. The IRR differential on a 320 kWp install is typically 4-6 percentage points.

Full Expensing becomes the relevant route in two specific scenarios: (a) where the business has exceeded its £1m AIA annual cap with other qualifying capex, and (b) where the business doesn't qualify for AIA at all (sole traders and partnerships cannot claim Full Expensing — it's companies only).

What qualifies for Full Expensing on office solar?

The same expenditure items that qualify for AIA qualify for Full Expensing — solar panels, inverters, mounting racking, cabling, monitoring hardware, and incorporated installation labour. The 50% FE rate applies to these as SRP assets.

Battery storage sits in the same SRP category. However, whether a BESS earns 50% FE or qualifies as Main Pool at 100% FE depends on how it's classified by HMRC. If the battery is an integral part of the solar generation asset (as it typically is for on-site solar self-consumption systems), it follows the solar classification into SRP at 50% FE. Batteries used primarily for grid trading may be treated differently — confirm with your tax adviser on systems over 100 kWh.

Full Expensing and leased / PPA-financed systems

Like AIA, Full Expensing applies only to owned assets. Under a power purchase agreement (PPA) or operating lease, the solar asset remains on the supplier's balance sheet and they claim the capital allowances. Customers under a PPA deduct lease payments as revenue expenditure — a different but often equivalent economic outcome, particularly relevant for companies wanting to treat solar costs as operational rather than capital spend.

For companies choosing cash purchase specifically to maximise capital allowance benefit, the decision between FE and AIA is straightforward: claim AIA first (100%), then use FE for any SRP overage above £1m. The combined effect can be modelled in our financial proposal alongside the PPA comparator — allowing you to see the post-tax IRR of each route side-by-side.

Common questions on Full Expensing for office solar

Is Full Expensing available to partnerships?

No. Full Expensing is available only to companies within the charge to corporation tax. Sole traders, partnerships, and LLPs use AIA as their primary first-year relief route.

Does Full Expensing apply to second-hand equipment?

No. Full Expensing applies to new and unused assets only. Buying a second-hand inverter or reconditioned panels would not qualify; only new plant and machinery is eligible.

Can we claim Full Expensing on a solar system installed in phases?

Yes, but relief is taken in the period in which each phase is brought into use. If phase one (200 kWp) commissions in March 2026 and phase two (120 kWp) in January 2027, each phase's expenditure is claimed in the respective accounting period.