Freehold vs Leasehold Property: Codes 0010 & 0011

Property is usually the biggest single number on a small business's balance sheet, which is exactly why Sage splits it into two separate Fixed Assets codes rather than lumping it into one. The split isn't just tidiness — freehold and leasehold property behave differently over time, and mixing them up leads to the wrong depreciation charge and a misstated asset value for years afterwards.

The two codes, and what each one holds

Code 0010 — Freehold Property records land and buildings the business owns outright, with no time limit on that ownership. Because the business isn't handing it back to anyone, the land element in particular is generally not depreciated — it's held at cost (or a revalued amount) indefinitely, with only the building element depreciated if it has a finite useful life.

Code 0011 — Leasehold Property records what's been paid for the right to occupy a property for a fixed term, rather than the property itself. That right runs down every year the lease exists, so unlike freehold, a leasehold premium is a wasting asset — it normally gets amortised in equal instalments over the remaining life of the lease, similar in spirit to how plant and machinery is depreciated on codes 0020/0021.

Real-world examples across industries

Manufacturing group, both codes in use at once

A manufacturer buys the freehold of its main factory outright for £850,000, funded partly by a commercial mortgage — a debit of £850,000 to 0010 (Freehold Property) and a matching credit to the bank/loan account. Whether VAT applies depends on whether the seller opted to tax the site, so it's worth confirming with the solicitor before completion rather than assuming a rate either way. The same group also leases a satellite storage unit on a 12-year term, having paid a £25,000 premium to the outgoing tenant to take over the lease — that premium is capitalised to 0011 (Leasehold Property) and amortised at £2,083 a year, quite separately from the freehold site, which isn't amortised at all.

Restaurant group, leasehold only

A restaurant group takes on a 15-year lease for a prime high-street unit, paying a £60,000 premium to the outgoing tenant for the assignment on top of ongoing rent. Our VAT calculator shows the premium can carry VAT at 20% if the landlord has opted to tax the property, adding £12,000 to the £60,000 net cost. The net £60,000 is debited to 0011 and amortised over the 15-year term at £4,000 a year; any recoverable VAT goes to 2201, not 0011. Code 0010 never comes into play here — restaurant groups almost always lease their sites rather than buy the freehold outright, so it typically sits at nil for a business like this.

Professional services, neither code used

A consultancy takes a straightforward 3-year office lease with no premium paid to move in. Because there's no significant capital sum changing hands, there's nothing to capitalise at all — the rent is simply expensed to Overheads as it's paid each quarter, and both 0010 and 0011 stay at nil. It's a reminder that these two codes only come into use when real money changes hands for the property right itself, not for ordinary rent.

Why this matters day to day

Filing a property purchase under the wrong one of these two codes is an easy mistake with a long tail: a leasehold premium booked to 0010 by mistake won't get amortised at all, quietly overstating fixed assets every year until someone catches it at a lease renewal or disposal. Keeping the two separate — and remembering that VAT on a commercial property purchase depends entirely on whether the landlord or seller has opted to tax it — keeps both the balance sheet and the VAT return accurate from day one.