When we take a day nursery to market, the fixed assets on its balance sheet are among the first things a buyer’s accountant asks about. Fixed assets are the long-term items a business owns and uses to trade, as opposed to stock it intends to sell. In a nursery that usually means the premises if they are owned, the fit-out of the baby and toddler rooms, the outdoor play equipment, and the furniture the children use every day.
We flag this early with sellers for a simple reason. Fixed assets feed one of the recognised ways of pricing the business, and the figure recorded in the accounts almost never matches what those assets would actually fetch today. This page stays tightly on fixed assets. For how they sit alongside goodwill and profit in the overall calculation, read the full guide on how to value a nursery business.
What counts as a fixed asset in a day nursery
A fixed asset, more precisely a tangible fixed asset, is a physical item held for continuing use in the business rather than for resale. UK companies account for these under Section 17 of FRS 102, the financial reporting standard that governs property, plant and equipment, as set out in the ICAEW guidance on property, plant and equipment under FRS 102.
In the deals we handle, the fixed assets fall into a few clear groups. There is the property itself where the site is freehold, which is usually the biggest single figure. There are leasehold improvements, meaning the money spent fitting out a rented building with partitions, nappy-changing areas, kitchens and flooring. There is the outdoor provision, covering playground surfacing, canopies, climbing frames and fencing. Then there are the smaller pools: IT and CCTV, any minibus used for the school run, and the furniture and fittings that fill every room.
Each group behaves differently in a valuation, and it pays to keep them apart. The freehold can rise in value over time, while equipment and vehicles wear out and lose value. Knowing which is which stops a buyer from overpaying for tired equipment, and stops a seller from underpricing a site whose land has risen in value.
Book value versus open market value, and why they differ
Two numbers describe the same asset, and mixing them up is the most common valuation mistake we come across. The book value, also called carrying value, is what the accounts say the asset is worth: its original cost less the depreciation charged against it since purchase. The open market value is what a willing buyer would pay for it today, in its current condition and location.
These figures pull apart for good reasons. A ten-year-old freehold nursery might sit in the books close to its original purchase price, yet be worth far more on the open market because local property values have risen. The opposite is true for a five-year-old soft-play installation carried at a modest book figure that no buyer would pay full price to inherit. Under FRS 102 a business can choose to hold assets at cost less depreciation or, for some classes such as property, at a revalued fair value, but most owner-managed nurseries we act for simply use the cost basis, which is why their filed numbers lag the market.
For the premises specifically, an open market valuation is normally prepared by a chartered surveyor working to the RICS Valuation Global Standards, known as the Red Book, which sets the definition of market value and the process a valuer must follow. If a buyer is leaning on the balance sheet alone for a freehold site, without a Red Book valuation, they are not seeing the real asset value, and we say so plainly.
Depreciation and how it changes carrying value over time
Depreciation is the accounting method of spreading an asset’s cost across its useful life. A nursery that spends money on a new kitchen does not treat the whole cost as an expense in year one; it writes a portion off each year, and the carrying value falls accordingly. This is a bookkeeping exercise, not a live reading of market value.
The rate depends on the asset. Fixtures, IT and furniture are often depreciated over three to seven years, while leasehold improvements are commonly written off over the length of the lease. When we review accounts, we look at both the gross cost and the accumulated depreciation, because a long list of nearly fully depreciated assets tells you reinvestment is overdue and capital spending is probably coming.
One point catches sellers out. Depreciation is an accounting figure, not a tax deduction. For tax, HMRC disallows accounting depreciation and instead grants capital allowances on plant and machinery, which run on their own timetable and rates. The two systems describe the same assets in different languages, and both come up during due diligence.
How fixed assets feed an asset based valuation
Fixed assets are the foundation of a net asset based valuation. In its simplest form, this method takes everything the business owns, including fixed assets at a realistic value plus cash and debtors, and subtracts everything it owes. The result is the net asset value, a floor figure for what the business is worth on a break-up or wind-down basis.
For a freehold nursery, this approach carries real weight, because the property is a substantial, saleable asset in its own right. For a leasehold nursery with modest equipment, the net asset value is usually small, and on its own it tells you very little about what the operating business is worth.
Where goodwill and earnings come in
Most trading nurseries are not sold on net assets alone. They are priced on their earnings, typically a multiple of adjusted profit, which captures the value of a full setting with a waiting list, a solid Ofsted record and a stable staff team. The gap between that earnings-based price and the net asset value is goodwill: the premium a buyer pays for a going concern over the sum of its parts.
The practical point we make to sellers is that fixed assets and goodwill are not counted twice. Where a freehold is included, its value tends to dominate and the deal looks asset-heavy. Where the site is leasehold, goodwill and earnings carry the price, and the fixed assets play a supporting role. The pillar guide on how to value a nursery business walks through how these methods are reconciled.
Freehold versus leasehold premises and their effect on value
The single biggest fixed asset question in any nursery sale is whether the premises are freehold or leasehold, because it changes the shape of the whole transaction.
A freehold nursery bundles a trading business with a commercial property. The property is a fixed asset that a buyer, and the lender behind them, will want independently valued, and in our experience it often decides whether a deal is financed straightforwardly or stalls. Freehold sites also give a buyer options a tenant does not have, such as extending the building to add rooms and raise registered capacity.
A leasehold nursery owns the fit-out but not the building. Here the fixed assets are largely leasehold improvements and equipment, and the value of the lease itself, meaning its remaining length, rent and terms, becomes central. A short lease with an uncertain renewal can pull value down sharply, because a buyer inherits the risk of losing the site. When looking at capital allowances, remember that a business generally cannot claim plant and machinery allowances on assets it leases rather than owns, a point covered in the GOV.UK guidance on what you can claim capital allowances on.
Tax and rates context: capital allowances and business rates
Fixed assets carry a tax profile that affects both the seller’s position and what the buyer takes on. Two areas come up in almost every nursery sale.
Capital allowances on nursery plant and machinery
Capital allowances are the tax relief a business claims on qualifying capital spending in place of depreciation. Much of a nursery’s fit-out, from integral electrical and heating systems to fixtures and equipment, can qualify. The Annual Investment Allowance lets a business claim 100 per cent relief on up to £1 million of qualifying plant and machinery in a period, as confirmed on the GOV.UK capital allowances overview. Limited companies can also use full expensing, a 100 per cent first-year deduction on qualifying new plant and machinery introduced from 1 April 2023.
The regime changed at the start of 2026, so current figures matter. A new 40 per cent first-year allowance applies to qualifying main-rate plant and machinery bought on or after 1 January 2026, and the main-rate writing down allowance fell from 18 per cent to 14 per cent from 1 April 2026, both set out in the GOV.UK measure on the new first-year allowance and reduced writing down allowances. Spending on the building structure itself does not qualify as plant and machinery, but construction or renovation of non-residential premises can attract the Structures and Buildings Allowance at 3 per cent a year on a straight-line basis over 33 and one-third years, as explained in the GOV.UK guidance on claiming capital allowances for structures and buildings. These rates and thresholds change at fiscal events, so confirm the current position before you rely on any of them.
Business rates and the Valuation Office Agency
A nursery’s premises are non-domestic property and are therefore subject to business rates. The rateable value, which is the estimated annual rent the premises could have been let for at a set valuation date, is set by the Valuation Office Agency, and the rates bill is worked out by applying a multiplier to that figure. We always suggest a buyer checks the current rateable value directly with the VOA rather than trusting the seller’s figure, because values are reset at periodic revaluations.
Smaller settings may pay little or nothing. Under GOV.UK small business rate relief in England, a property with a rateable value of £12,000 or less that is a business’s only property attracts 100 per cent relief, with tapered relief between £12,001 and £15,000. For 2026 to 2027 the small business multiplier is 43.2p and the standard multiplier is 48p. These rules apply in England; Scotland and Wales run their own systems, and the reliefs and multipliers are reviewed regularly, so check the live figures for the specific premises.
Due diligence on the asset register before a sale
The asset register is the schedule listing every fixed asset the business owns, its cost, its purchase date and its current carrying value. A clean, current register is one of the simplest ways a seller can build buyer confidence, and a missing or out-of-date one is a red flag that slows a deal down. We would rather tell a seller this before they go to market than have a buyer raise it later.
Before going to market, reconcile the register against what is physically on site. Assets that have been scrapped but never written off inflate the book figures; assets bought and never recorded understate them. It also pays to separate items that belong to the business from those that belong to a landlord or a leasing company, because a buyer only pays for what the seller can actually hand over. Equipment on lease or hire purchase should be flagged, since the outstanding finance travels with the deal.
Buyers, for their part, use the register to test the reinvestment story. A setting whose assets are almost entirely depreciated may need fresh capital soon, and that expected spend is a fair point to raise in price talks. The fixed asset figures filed at Companies House are a useful starting point, but small companies and micro-entities often file reduced accounts with limited detail, so the full register and a site visit still matter.
Bringing it back to the full valuation method
Fixed assets set the floor and shape the structure of a nursery sale, but on their own they rarely set the final price. A freehold pushes the deal towards its asset value; a leasehold pushes it towards earnings and goodwill; and depreciation, capital allowances and business rates all affect how those assets look in the accounts compared with what they are worth today.
If you are weighing up a sale or a purchase, the sensible next step is to see how fixed assets combine with profit multiples and goodwill in a full valuation. That is covered in the pillar guide on how to value a nursery business, which puts the asset picture back into the wider method.
Frequently asked questions
Do fixed assets or goodwill matter more when valuing a nursery
It depends on the premises. A freehold nursery is often priced on its assets, because the property is substantial and independently valued, while a leasehold nursery is usually priced on earnings and goodwill, with fixed assets in a supporting role.
Does the Companies House balance sheet show what a nursery’s assets are worth
Not on its own. Filed accounts show carrying value, meaning cost less depreciation, which can sit well below or above open market value, and small companies often file reduced accounts. A freehold in particular needs a separate valuation prepared to RICS Red Book standards.
Will a buyer pay separately for the freehold and the business
The freehold is one of the fixed assets included in the overall deal rather than a wholly separate purchase, though it is valued in its own right and heavily influences both the price and how the buyer arranges finance. Confirm the exact structure and any current tax and rates figures with your own advisers before you rely on them.
Author – John P. Gaskell
John is a senior member of the Blacks Brokers team with extensive experience leading successful national sales operations. He plays a central role in developing the team’s approach to client service, drawing on a deep belief that positivity, care and drive are the defining qualities of any great salesperson. John delivers comprehensive training across the organisation that instils a client-first ethos at every level, ensuring consistency of service throughout every transaction. His focus is always on achieving the best possible outcome for each client the business serves.
