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.

A worked example

Say a business takes on a 10-year lease on an office, paying a one-off lease premium of £40,000 to the landlord. The landlord has opted to tax the property, so VAT at the standard rate applies to the premium on top.

VAT on the premium: our VAT calculator shows £40,000 at 20% adds £8,000 of VAT, making £48,000 payable in total.

Leasehold Property (code 0011): debited with the £40,000 net cost — the VAT itself never sits in this code.

Purchase Tax Control Account (code 2201): debited with the £8,000 VAT, assuming it's recoverable.

Bank (code 1200): credited £48,000 for the full amount actually paid out.

From there, the £40,000 in code 0011 is amortised over the 10-year lease term — £4,000 a year — rather than sitting untouched the way a freehold purchase on code 0010 typically would.

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.