New Financial Conduct Authority (FCA) chairman Charles Randell has told the Treasury select committee that his decision to invest in a controversial film production scheme was an 'error of judgment'.
Ingenious Film Partners 2 LLP, which also drew investment from football stars David Beckham and Wayne Rooney and invested in the production of films such as Avatar and The Life of Pi, lost an appeal against a £700 million tax bill by HM Revenue & Customs (HMRC) last year.
In a letter to Treasury permanent secretary Tom Sinclair, Randell explained that the investment was promoted to him by his financial adviser in 2006 and that he remained a member until 2011.
Asked about his involvement in the scheme by committee chair Nicky Morgan MP yesterday, Randell said: '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 indicated that they approved of it.
'It didn’t strike me as odd at the time that I made the investment because of the factors I have outlined, that I was given to understand that HMRC regarded this as a conservatively structured partnership which they thought was within the spirit of their tax legislation.
'My error of judgment was relying on an assurance that HMRC approved the arrangement.'
The scheme made use of tax breaks designed to encourage film production in the UK. Under the rules at the time those who backed films could claim tax relief for losses incurred in the production of the films.
However, HM Revenue & Customs (HMRC) claimed some schemes were being used to avoid tax rather than fund films, including Ingenious.
Other high profile members of the scheme included Bob Geldof, Ant and Dec and Gary Lineker
After withdrawing from the partnership in 2011, Randell repaid £114,000 in tax relief to HMRC and 'dispensed with the services' of his financial adviser.
His letter to Sinclair adds: '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.'
Read his letter in full here.