The incoming chairman of the Financial Conduct Authority (FCA) has admitted making an “error of judgment” after it was revealed he had invested in a tax relief scheme.
Charles Randell appeared before the Treasury Select Committee on Tuesday, where he disclosed he had put money in a film production partnership, called Ingenious Film Partners 2, between 2006 and 2011.
He was questioned by committee chair Nicky Morgan, who said she had written to Treasury permanent secretary Sir Tom Scholar in January regarding Mr Randell’s involvement in the partnership which “at least in the view of HMRC is a tax avoidance scheme”.
Mr Randell said he invested in the scheme after it was promoted to him by his financial adviser and after receiving assurances it was – at the time – approved by HMRC.
Referencing a letter he had sent to Sir Tom about Mrs Morgan’s correspondence, he told the committee: “I think I also said in the letter that I regarded the fact that I hadn’t made sufficient investigations into the assurances I was given to be an error of judgment and, I need to be careful here, because anything I say will sound like an excuse, whereas I take responsibility for the decision that I took.
“But I was reassured to hear that this partnership had been discussed with senior policy officials at HMRC, 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. There wasn’t a binding approval mechanism.
“And if HMRC did approve it in 2005, which I’ve been told repeatedly is the case, then it was always open to them to change their mind, which they obviously did do.”
When asked if he could see whether such a scheme could look to “ordinary people… those who aren’t seeking to be FCA chair” like “some rather clever tax wheeze”, he replied: “Yes, I can.”
In letters now published on the committee’s website, Sir Tom said the panel was aware of the matter and Mr Randell had disclosed his involvement during his interview for the role at the financial industry watchdog.
It added: “He explained to the panel that he had withdrawn from the partnership and fully settled his tax affairs in relation to the partnership.”
Mr Randell repaid £114,000 plus interest in 2015 after receiving a letter from HMRC, and said he had withdrawn from the partnership.
In his letter to Mrs Morgan, Sir Tom said: “The panel was content that Mr Randell had taken appropriate action, and concluded that this should not prevent him from being appointed.”
Mr Randell was announced as the new FCA chair on January 5 and will take over the role from John Griffith-Jones on April 1, making him the UK watchdog’s second chair since its formation in 2013.
Mr Randell will join the FCA after a long stint as a lawyer at Slaughter and May from 1980 to 2013, having specialised in corporate finance law and taken on a string of bank restructuring assignments that saw him advise the Treasury on the resolution of Northern Rock, Bradford & Bingley and Icelandic banks.
A Treasury spokesman said: “Charles Randell has extensive experience in UK financial services regulation and his appointment was made on the basis of merit following a fair and impartial recruitment process.”
On the same day, the Treasury Select Committee branded the findings of a report into the Royal Bank of Scotland’s mistreatment of small businesses “disgraceful” after wielding parliamentary privilege to publish the controversial dossier.
Mr Randell said: “It must be my first priority when I arrive at the FCA to conduct my own assessment of, I think, not just the RBS GRG (Global Restructuring Group) report, but the background to all of the cases where there has been, as I say, this very obvious tension between public expectations and the expectations of (Treasury Select) Committee and what the FCA has felt able to deliver.”