The incoming chairman of the Financial Conduct Authority has admitted to an “error of judgment” after investing in a controversial tax avoidance scheme that resulted in him repaying more than £100,000 to the taxman.
Charles Randell, a former City lawyer and government adviser at the time of the financial crisis, told the Treasury select committee that he had failed to see a “warning signal” about Ingenious Film Partners 2 LLP, an investment product that promised members tax reliefs but was subsequently challenged by HM Revenue & Customs.
Ingenious Film Partners 2 was a film production partnership which proved popular with many celebrities and sports stars including Steven Gerrard, Ryan Giggs and David Beckham. It used tax breaks designed to encourage films to be made in the UK. Those who put money into the scheme could claim tax relief against film production losses.
In a hearing on Tuesday Randell, who was appointed last month and is due to take over the top job at the City watchdog in April, told the committee: “I take responsibility for the decision that I took.”
He said he had been reassured that the scheme “had been discussed with senior policy officials at HMRC who had indicated that they approved of it.”
Randell then added: “It’s clear to me now that far from taking any comfort from that, I should have seen it as a warning signal because the mere fact that an informal assurance was seen to be necessary should have been telling me that this was an investment for which there wasn’t a specific statutory framework”.
The disclosure came during a parliamentary hearing into Randell’s appointment to lead the financial watchdog, which is accountable to the Treasury and parliament.
Committee chair Nicky Morgan asked Randell if he could see that the Ingenious scheme would look, to the general public, like a “rather clever tax wheeze” to let people pay less tax.
“Yes I can”, Randell replied. He added that he had “dispensed with the services” of his financial adviser when HMRC began taking action against the scheme.
Ahead of the session Morgan, had written to the Treasury to ask if it had been aware of Randell’s investment before appointing him.
Sir Tom Scholar, the Treasury’s permanent secretary, said Randell’s investment had been disclosed to the interview panel. Scholar said the panel had been “content that [Randell] had taken appropriate action” after he told them he had repaid the tax savings made and withdrawn from the scheme.
In a subsequent letter to Scholar, Randell wrote: “The amount repaid to HMRC, which was not discussed at the interview, was approximately £114,000 plus interest.
He added: “I told the panel that I considered that my decision to invest in this partnership was an error of judgment which I regretted. I did not elaborate on this at the interview but I regret failing to independently investigate the assurances I received that HMRC were content with the partnership arrangements.”
Randell is currently an external member of the Prudential Regulation Committee of the Bank of England and a non-executive board member of the Department for Business, Energy and Industrial Strategy.
He worked at the law firm Slaughter and May from 1980 to 2013, becoming a partner in 1989.
Hearings by the Treasury committee into top appointments at the FCA and the Bank of England are commonplace, and are not without incident.
Last year Charlotte Hogg resigned as deputy governor of the Bank of England barely two weeks after being promoted.
Hogg had initially told the committee that the Bank was aware of her brother’s role at Barclays, but then admitted days later she had not made the disclosure and was therefore in breach of the Bank’s code of conduct she had helped to write.