Commercial vs domestic solar — why business rules are different

Search for solar advice and you'll mostly find guidance written for households — the 0% VAT, the evening-battery sizing, the consumer-protection reassurances. Almost none of it transfers cleanly to a business decision, and some of it will actively mislead you. If you're buying solar for a company, here's everything that's different — and why it matters.

The differences at a glance

	Domestic	Commercial
Typical size	3–5 kWp	30–250+ kWp
VAT	0% (to 31 Mar 2027)	20%, reclaimable if VAT-registered
Tax relief on capex	None	Capital allowances (AIA)
Peak consumption	Evening	Working day
Typical self-consumption	~30–40%	~60–75%
Grid connection	Usually G98 notification	Usually G99 application
Consumer-code protection	RECC and consumer law	Largely none — contract only
Business rates	N/A	Exempt on solar to 2035
Metering	Standard/smart meter	Often half-hourly

The rest of this guide is why each row matters.

1. Scale and engineering

A typical home system is 3–5 kWp. A commercial system is usually 30 to 250+ kWp — ten to fifty times larger. That changes the engineering: three-phase electrics, structural loading assessments, and a proper site survey covering roof condition, asbestos and switchgear capacity.

It also changes who does the work. A domestic install is a two-day job for a small crew. A 200 kWp commercial array is a multi-week project with scaffolding or mast climbers, a temporary works design, CDM regulations, and a main contractor's site rules to work around. It's a different class of project, not a scaled-up house — and it should be procured like one (see how to choose an installer).

2. VAT: 0% for homes, 20% for you

This one trips up businesses constantly. Domestic solar installations carry 0% VAT (in place to 31 March 2027). That relief does not apply to commercial premises, which pay the standard 20% VAT.

The saving grace is that VAT-registered businesses reclaim it through their normal VAT return — so for most it's a cash-flow timing issue, not a true cost. But it is a real cash-flow event: on a £90,000 system that's £18,000 out the door before it comes back on your next return, and your finance director should know that before the invoice lands. If you read "solar is 0% VAT" and budget on that as a business, your numbers are wrong. (Detail in grants and funding.)

3. Capital allowances: a business-only win

Households get no tax deduction for solar. Businesses do — and this is the single largest item on the commercial side of the ledger.

Commercial solar qualifies for the Annual Investment Allowance (AIA): a 100% first-year deduction on qualifying plant and machinery, up to £1m a year. For a company paying the 25% main rate of corporation tax, that's worth roughly a quarter of the system cost back in reduced tax. On a £90,000 array, about £22,500.

One nuance worth knowing, because it catches people whose AIA is already spent: solar panels are classified as special-rate assets. That means AIA is the route that gets you the full 100% — and if your AIA allowance is exhausted or unavailable, relief drops to the special-rate writing-down allowance (6% a year on a reducing balance), which is a far slower recovery. Full expensing, the headline relief you may have read about, does not cover special-rate assets. Confirm your position with your accountant before you model the tax benefit, because "we'll get the AIA" is an assumption, not a certainty.

There's a second business-only relief: solar equipment is exempt from business rates until 2035, so adding an array doesn't increase your rateable value in the way other plant might.

4. Consumption shape: businesses often win here

Homes consume most of their electricity in the evening — after work, when the solar day is over. That mismatch is why domestic advice leans so heavily on batteries; without one, a household might self-consume only 30–40% of what it generates.

Many businesses are the opposite. They consume during the working day, exactly when the panels generate, and commonly self-consume 60–75% without any storage at all. That single difference does more for commercial economics than anything else on this list: every self-consumed unit is worth your full ~28p import rate rather than the export rate.

It also inverts the battery advice. For a household, a battery is close to essential to make the numbers work. For a daytime-operating business, a battery is often the weakest part of the proposal — there's less surplus to store and the core value is already being captured. That doesn't mean never; it means the case has to be made specifically, on peak shaving or a genuine evening load, rather than assumed. (See south-facing vs east-west and battery storage.)

5. Tariffs and demand charges

Households pay relatively simple flat or time-of-use tariffs. Commercial electricity contracts can include capacity and demand charges — costs based on your peak power draw, not just total energy consumed.

That's a value lever with no domestic equivalent. If your bill carries a £/kW capacity charge, shaving your metered peak has a value entirely separate from the units you save, and it keeps earning in midwinter when generation is negligible. It's also why commercial sites are frequently on half-hourly metering, which gives you something no homeowner has: a complete record of when you actually use power. That data is the only honest basis for sizing an array or a battery — see half-hourly data and self-consumption.

6. Consumer protection: it protects homeowners, not businesses

Domestic buyers are covered by consumer codes like RECC and by consumer law generally — cooling-off periods, deposit protection, workmanship warranties backed by the code.

As a business, you're typically not a "consumer" in the legal sense, so those protections largely don't apply to you. There's no statutory cooling-off period on a B2B contract, no code body to escalate to, and no automatic deposit protection. Your safeguards have to be written into the commercial contract instead: retention, performance guarantees, liquidated damages for delay, defined workmanship warranty periods, and clarity on who owns the warranties if the installer ceases trading.

This is the most widely-missed distinction on this page, and the most expensive one to discover late. MCS accreditation still matters — it's the technical standard and the gateway to export payments — but it is not a substitute for the consumer protection you don't have. We cover the split in MCS vs RECC, and the contract terms to insist on in reading a commercial solar quote.

7. Grid connection

A domestic array is usually small enough to be notified to the network operator after installation under G98. A commercial array almost always requires a G99 application before installation, with the DNO assessing whether the local network can accept your export.

That process takes weeks to months, can come back with a capacity limit, and occasionally returns a connection offer with a reinforcement cost attached. It is the most common cause of commercial solar projects slipping — far more than planning. Start it early (see planning permission, which covers the DNO route in detail).

8. Planning

Domestic and commercial both benefit from permitted-development rights, but the specifics differ. For commercial rooftop, the old 1MW cap was removed in 2023, so most business rooftop solar now needs no planning application at all — subject to conditions on listed buildings, conservation areas and projection above the roof plane.

Ground-mounted arrays are the exception in both sectors and need a full application — see ground-mount vs roof-mount.

9. The payback verdict

Domestic payback varies widely with usage and battery choices. Commercial payback is currently 7–9 years on a well-suited site, sometimes faster where daytime self-consumption is high — after which the system delivers for another 15+ years against a 25-year panel warranty.

The combination of scale, capital allowances, daytime usage and high commercial electricity prices is what makes the business case distinct. Notably, a commercial system often pays back faster than a domestic one despite paying 20% VAT — because self-consumption and tax relief more than compensate.

Sanity-check

1. Is the quote VAT-inclusive or exclusive? Commercial quotes are usually ex-VAT; make sure the cash-flow impact is understood.
2. Has anyone confirmed your AIA is actually available this year, and that your accountant agrees solar qualifies in your circumstances?
3. Is the self-consumption figure based on your half-hourly data, or a domestic-style assumption?
4. Is a battery being recommended by default? For a daytime business that's a domestic reflex — make them justify it.
5. What protects you if the installer folds? Name the contract clause, because RECC won't.
6. Has the G99 application been submitted, and what's the expected determination date?

The bottom line

Don't run a commercial solar decision on domestic rules of thumb. You don't get 0% VAT, but you do get capital allowances worth roughly a quarter of the capex; you probably self-consume twice what a household does; your tariff may reward peak shaving in ways a home's never would; your grid connection is an application rather than a notification; and the consumer protections you'd assume as a homeowner don't shield your company at all. The business case is genuinely stronger than the domestic one — but only if you build it on business rules.

Start with the numbers for your building: run the calculator. Then the payback and grants and funding guides cover the money, and the Brief keeps you current.

General information, not tax or legal advice. Tax treatment depends on your circumstances — confirm capital-allowance eligibility with your accountant and contract terms with your solicitor.