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HMRC internal manual

Business Leasing Manual

’Income-into-capital’ schemes and back loaded leases: 'Income-into-capital' schemes: rental profiles

In some income-into-capital schemes the rent shoots up dramatically after, say, ten years to ensure the lessee will exercise the purchase option. But this isn’t an essential feature of the schemes. Generally, the Borrower will want to exercise the option anyway because the net cost will be cheaper where the Bank saves tax on its ‘interest’ earnings and shares the benefit with the Borrower.