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In the example at BLM71010 there is not a loan in legal terms but the net result is the same. The Borrower gets £10 million by parting with their property at the outset and repays the £10m with ‘interest� in Year 10. Ignoring tax and any modest actual rent, the interest on a £10 million loan compounded at 10% for ten years at annual rests is £16 million. So the lump sum the lender has to pay under the option is £26 million. In practice, the bank would charge less than £26 million because of the tax savings on the £16 million ‘interest� turn. Only a single sum would be paid by the Borrower - the ‘interest� element is not identified separately.

There may also be an added benefit to the Bank from capital allowances. In the example given above capital allowances might have been given on £10 million - perhaps £9 plus million if 25% writing-down allowances applied by the time the option is exercised. But the net cost to the Bank is nil because it effectively recovers the £10 million cost.