BBC helps its chief to avoid tax: Exclusive: Birt's salary paid to his private company

JOHN BIRT, the new Director-General of the BBC, has avoided tax by being paid as a freelance consultant - despite being a full-time employee of the Corporation. Instead of paying tax on his BBC salary, he has been taxed on whatever he chooses to pay himself from his private company.

According to the BBC, details of Mr Birt's pay as Director-General have still to be finalised. He took over his new job at Christmas instead of next month, as planned. But for six years as Deputy Director-General he was paid through his private company.

Mr Birt, 48, joined the BBC as Deputy Director-General from London Weekend Television in 1987. Famed for a meticulous and analytical approach, he aroused controversy by streamlining BBC News and Current Affairs. He is expected to remain Director-General until the BBC's charter comes up for renewal in 1996.

Because celebrities are paid from a variety of sources - books, personal appearances, films and records - they are usually given freelance contracts, as are producers of one-off programmes. But it has now emerged that senior BBC executives, who neither appear in programmes nor produce them, enjoy similar treatment.

Documents filed at Companies House show that, as Deputy Director-General, Mr Birt was paid gross by the BBC and then claimed a long list of items against tax, including designer suits and visits to the theatre.

Mr Birt has a private company, John Birt Productions Limited. It was formed in 1980 and has two shareholders: himself and his wife, Jane, a painter. The company gives its principal activity as 'providing consultancy services in the field of theatres and television'. Its address is Mr Birt's home in south-west London. He does not list the company in his Who's Who entry.

In the year ending 31 August 1991 John Birt Limited reported a turnover of pounds 163,141. By far the bulk of this was Mr Birt's salary as Deputy Director-General. The BBC does not disclose the salaries of its senior executives, but its latest annual report said that the highest-paid member of the Board of Management - presumably Michael Checkland, the Director-General - earned pounds 149,148. The next highest - presumably Mr Birt - received between pounds 135,000 and pounds 140,000.

Set against the turnover of John Birt Limited are 'administration expenses'. These include:

Pounds Secretarial assistant. . . . . . . . . . . . . .15,000 Wardrobe. . . . . . . . . . . . . . . . . . . . .3,666 Travel, accommodation. . . . . . . . . . . . . . 8,791 Lighting and heating. . . . . . . . . . . . . . .1,127 Motor expenses. . . . . . . . . . . . . . . . . .2,612 Telephone and postage. . . . . . . . . . . . . . 1,501 Books and journals. . . . . . . . . . . . . . . .1,350 Entertainment. . . . . . . . . . . . . . . . . . 2,366 Sundry expenses. . . . . . . . . . . . . . . . . . 316 Insurance. . . . . . . . . . . . . . . . . . . . . 989 Cleaning. . . . . . . . . . . . . . . . . . . . . .920 Theatre visits/research. . . . . . . . . . . . . . 340 Depreciation. . . . . . . . . . . . . . . . . . . .300

The expenses also include payment of salaries to Mr Birt and his wife of pounds 59,000 and pounds 14,000 respectively, a pounds 36,167 contribution to his private pension plan, pounds 7,604 National Insurance contributions and pounds 3,100 accountancy fees.

After deducting the pounds 159,174 in expenses from turnover, the profit of John Birt Limited was pounds 3,967. The company paid no corporation tax on the profit, however, because of the deduction of capital allowances and losses carried over from previous years.

Instead of paying tax on his six-figure BBC salary under PAYE, Mr Birt paid tax only on the salary he awarded himself as a director of his company, pounds 59,000.

Barry Kernon of Kernon & Co, an accountancy firm that acts for many writers and broadcasters, said: 'It is a little unusual for the earnings of an individual in a senior managerial position in a corporation to be paid through a company he controls. In the normal way, I would expect this to be treated as a salary and for this to be taxed under PAYE.'

A BBC source said that by being paid this way, Mr Birt would save the BBC from paying National Insurance on his salary. He added: 'All these efficiency measures to which we are submitting ourselves are being driven by him. As you can see, he has a certain amount of expertise in this area.'

An Inland Revenue spokeswoman said she could not comment about an individual's tax affairs, but the BBC was treated like any other employer. 'Whether you are self-employed or PAYE is a matter of fact and that is all,' she said.

The Inland Revenue, she explained, has criteria for determining whether people can be classed as self-employed or as employees. People are generally judged to be self-employed if they risk their own money in the business; if they are free to hire other people; and if they have the final say in how the business is run. Employees are generally judged to be people who have to do the work rather than hire someone else to do it for them; who work set hours and at the premises of the person or organisation they are working for.

Mr Birt would not speak directly, but a BBC spokesman said: 'Arrangements of this kind are not unusual in the broadcasting and entertainment industry, and John Birt has been either a freelance or has contracted his services through his own company on fixed-term contracts for over 20 years. The same contractual arrangements that operated when he was director of programmes at LWT applied when he joined the BBC as Deputy Director-General.'

(Photograph omitted)