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HMRC internal manual

Business Leasing Manual

’Income-into-capital’ schemes and back loaded leases: 'Income-into-capital' schemes: Purchase options: option price

In an income-into-capital scheme the price at which the option may be exercised is designed to (after taking account of the effect of any actual rent payable by Borrower to Bank):

  • provide Bank with a commercial interest return; however this element will be reduced because Bank doesn’t pay tax on it; and
  • repay the ‘loan’ - the amount Bank paid to Borrower for the asset at the outset (or which Bank paid to a third party for the asset where Borrower didn’t previously own it).