Readers’ forum: Is there VAT on demolition services?

My client has purchased a derelict pub and has planning permission to demolish the building completely and build a block of six flats on three floors ie new dwellings.

Our intention was to appoint contractor A to carry out the demolition and building work as a single contract. However contractor B has produced a more competitive tender for the demolition work so we have awarded that part of the contract to this business. However the director of B says that his company must charge VAT at 20% on the demolition work because it is not doing any subsequent building work. The director of A has confirmed that zero rating would apply to the full contract of demolition and build. This difference in the VAT treatment does not seem correct to me – the same demolition work is being done but A will zero-rate and B will...