Pressure on for revenue inquiry into Birt's taxes

THE CHAIRMAN of one of the most powerful Commons committees last night called for an Inland Revenue investigation into the tax affairs of John Birt, Director-General of the BBC.

John Watts, Tory chairman of the Treasury Select Committee, added his weight to growing demands for an investigation following last week's revelations in the Independent on Sunday that Mr Birt's BBC salary, thought to be about pounds 150,000, was paid into his private company, enabling him to avoid tax on a substantial part of his salary.

Today we can reveal that Mr Birt wrote off foreign travel, items of furniture and electronic accessories against tax since 1980 when he began to be paid through his company, John Birt Productions. He and his wife are the only directors, and the company operates from his home in south London.

Detailed examination of its accounts reveals claims for:

Office chair - pounds 107 (1982);

Amplifier - pounds 89 (1985);

Speakers - pounds 115 (1985);

VW Golf CL - pounds 5,272 (1986);

Typewriter - pounds 200 (1986);

Foreign travel and subsistence expenses of pounds 11,989. This related to two 'business trips' - to Italy for four days and the United States for six (1986);

Camera - pounds 134 (1987);

Desk - pounds 700 (1988);

Satellite dish - pounds 327 (1989).

In some years, his expenses have been so great that his company incurred a loss. In 1990, it received pounds 159,244 - most of it his salary as the BBC Deputy Director-General. Against that, he claimed pounds 165,365 (including salaries to himself and his wife of pounds 97,198) to give a loss for his company for the year of pounds 6,232.

After last week's revelations, Mr Birt moved to join the staff of the BBC and go on to PAYE. But Mr Watts said there was 'a very good case to be made for the Inland Revenue to go back and look over these accounts'.

'I would be surprised if it found that these practices were acceptable, particularly when it is waging a relentless war against the truly self-employed.'

Kim Howells, a Labour member of the Public Accounts Committee, said MPs planned to ask the Comptroller and Auditor General, Sir John Bourn, to consider plugging the tax loophole.

'There has been a disturbing trend over the past decade for the ethos of the private sector to find its way into the life of public administration. We are finding more people like John Birt who are regarded as public servants but who are behaving as though they were part of the rough and tumble of the private sector.

'We are at the top of a very slippery slope which could degenerate into an Italian-style regard for avoiding taxes whenever possible.'

In a statement last week, Mr Birt said that contractual arrangements of his type were common in broadcasting. They are - but not among administrators. Extensive inquiries by the Independent on Sunday show that only one other broadcaster, London Weekend Television, has regularly paid executives through private companies. All or part of their remuneration was paid gross. They were then able to offset a range of expenses against tax. They only pay income tax on their private company salaries. By paying them in this way, LWT was able to a save itself National Insurance.

Apart from Mr Birt, other past and present LWT freelancers include Michael Grade, the Channel 4 chief. He had a company called Farmtackle at LWT but at Channel 4 is on PAYE. Ron Miller, LWT's sales director, has a company called Rivercare. In 1991, it spent pounds 7,000 on an 'office extension'. Mr Miller said on Friday that the extension was a personal matter. He maintained that for the last six years he has been on PAYE at LWT.

Barry Cox, LWT's corporate affairs director, owns Mapledene TV Productions. Marcus Plantin, now ITV's network controller, received fees to Purdenhoe Ltd. Brian Tesler, the station's former managing-director has been partly paid through Multithon Limited. Sir Christopher Bland, LWT's chairman, who strongly defended Mr Birt last week, also had a private company, Playford Productions.

Mr Birt refused to discuss his accounts in detail on Friday, but a BBC spokesman said the corporation had not 'consulted or informed' the revenue about the private company. Dealings with the revenue were 'a matter for the company (John Birt productions) concerned'.

BBC sources said the corporation and its licence payers would not be liable if the revenue demanded back tax. But leading City accountants, warned the BBC that if tax inspectors were to find that Mr Birt should have been paying tax and National Insurance on his full BBC salary the corporation could have to pay back tax, National Insurance and a penalty fine.

Chris Adams, a tax partner with leading accountants Arthur Andersen, who specialises in the media and television industry, said: 'Some companies may believe it saves them money having to pay employers national insurance contributions if they treat their managers as private companies. But we always warn that it is the employer, in this case the BBC, who would be liable.'

Senior Inland Revenue sources said it was 'almost inconceivable' that Mr Birt's attempt to cut the tax bill on his BBC salary and then claim tens of thousands of pounds of expenses would not be challenged.

'The key question we always ask is whether the job is an office or post which only one person can fill. The Director-General of the BBC is quite clearly a full time job,' the source said.

Inside Story, pages 16,17

Leading article, page 22