Can I reclaim VAT for groundwork?

I recently appointed a VAT registered groundworker to clear my site and dig the footings for my new self build. He informed me that he had his own digger, and I was given an all-inclusive price for the service.

Despite this, the groundworker has now sent me an invoice for his labour, which includes the VAT for a digger that he apparently rented for the job (despite having a digger of his own). He has also charged VAT on the muck away, which was done by a third party.

I’ve had a look on the self build section of HMRC website and it implies that plant hired with an operator can be zero rated on a new qualifying building (and I understand a new self build is a qualifying building). The words ‘can be’ sound a little vague. Should VAT be charged on the muck away if it was an all-inclusive price to do the job?

The DIY VAT Reclaim rules under VAT Notice 431(NB) allow you to zero-rate all the labour involved in the build and to reclaim the VAT paid out on most materials used in the construction of a new dwelling (there are a few exceptions). However, plant hire and muck away are specifically excluded from the scheme.

Because the invoice is explicit as to the nature of the plant hire and muck away service provided by your groundworker, you will not be able to reclaim the VAT charged. If the work had been part of a larger contract for the construction of the whole property, breaking out the plant hire element could be considered too difficult and time-consuming for the sums involved and might possibly have been ignored by HMRC. But in this case, your groundworker would appear to have invoiced correctly and therefore I’m afraid you will have to follow the rules and pay the VAT element without the option to reclaim.