Charles Randell (pictured), who takes over as the chairman of the UK's Financial Conduct Authority on April Fool's Day, has admitted to making an 'error of judgment' over a tax avoidance scheme - described as such by HM Revenue & Customs - in which he participated.

In a process it calls 'oral evidence,' the Treasury Select Committee recently questioned Randell about the work of the FCA and the Payments Systems Regulator. The topics it covered during the session included his membership of Ingenious Film Partners 2 LLP.

Last year the first-tier tax tribunal ruled that this and another scheme called Icebreaker were being used to avoid tax. The Ingenious scheme, beloved of football stars such as Ryan Giggs and David Beckham, involved the claiming of tax relief against losses made during the production of films on British soil. Randell had already told the committee in a letter that he had invested in the scheme after his financial advisor had 'promoted' it to him and on the basis of third‑party assurances that HMRC was content with it.

Randell then told the committee in person: "[It] had been discussed with senior policy officials at HM Revenue & Customs who had indicated that they approved of it. 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."

According to our sister-site WealthBriefing, Randell and the celebrities invested more than £1.2 billion in the Ingenious Film Partners 2 scheme, whose details were as follows.

- The scheme qualified for tax breaks under rules designed to stimulate the British film industry.
- Hit movies such as Life of Pi, Avatar and Girl With a Pearl Earring all benefited from tax relief.
- The stars invested in Ingenious and became directors of various partnership schemes, allowing them to claim tax relief through the films so that it reduced their own overall bills.
- They each paid a minimum of £100,000 to invest in the scheme.

Randell eventually withdrew from the scheme, repaying every tax break that he had claimed (about £114,000 plus interest) and taking full responsibility for his actions. According to Sir Thomas Whinfield Scholar, the Permanent Secretary at HM Treasury, the interview panel knew all about it before appointing Randell as the FCA's chairman. In a letter to the senior civil servant, Randell confessed that he regretted "failing to independently investigate the assurances I received that HMRC were content with the partnership arrangements."

The chairman of the Treasury Committee rounded the subject off by posing a withering question: "Can you see how to ordinary people — I mean those who are not seeking to be FCA chair — on being told how the scheme works, it could well look like some rather clever tax wheeze, so that people are paying less tax, and the sort of scheme that is not open to many of the consumers who invest in businesses regulated by the FCA?"

To this, Charles Randell replied sheepishly: "Yes, I can."

The whole episode has cast doubts on Randell's ability to hold the City to account. The Daily Mail has quoted Nikki Turner, whose business was destroyed by rogue bank staff at HBOS and who now runs a campaign group called SME Alliance, as saying: "I’m really shocked. As arrogant as these people are, they must realise that their credibility has gone right out of the window. They’re already on such fragile ground, because most victims don’t trust the FCA anyway, and to put someone like this in charge is a slap in the face to the small business world and to all consumers. If they wanted to build any trust they wouldn’t go ahead with it."

The paper also quotes the commissioner for Thames Valley Police calling the new appointee "another Treasury plant who was put in there by civil servants who didn’t tell the ministers."