Finance Leasing Manual - FLM12.39

No secondary lease period: other situations

It is possible that a lessor or lessee in the same group, or who are connected, might enter into a wholly uncommercial deal which leaves the lessee with neither a secondary period nor a rental rebate. The parties just do nothing when the lease ends - the lessee just carries on using the asset and the lessor does nothing. It may not, of course, matter much for tax purposes. A UK resident lessor group member should also be taxed over the primary period and there may be nothing in it for the group as a whole: the figures are self cancelling. But this may not be the case if the lessor is resident abroad in a jurisdiction which permits the deferral of income or if the lessor is resident in a tax haven or is tax exempt, see FLM12.40.