Charles Randell, a former city lawyer and government adviser during the global financial crisis, was tipped to replace outgoing FCA chair John Griffith-Jones in early January.
He is expected to take up the role in April 2018.
On Tuesday, he appeared before the Treasury Select Committee and said that the Ingenious Film Partners 2 scheme had been recommended to him by a financial adviser.
Randell paid into the scheme between 2006 and 2011 and said that he had been told it was approved by the UK taxman.
“I was reassured that this partnership had been discussed with senior officials at HMRC, who indicated that they approved of it,” he said to the committee.
“It’s clear to me now that, far from taking any comfort from that, I should have seen it as a warning signal.”
Letter to Treasury
In a bid to head off questions around his involvement with Ingenious, Randell wrote to the permanent secretary of HM Treasury to address the matter on 16 January.
“I thought it would be helpful to record in writing what I told the panel at the interview.”
He explained thathe had invested in the scheme, which was promoted by his financial adviser.
“I also explained that I had fully settled my tax affairs in relation to the partnership, by repaying as requested by HMRC an amount of tax relief originally granted by them. I also confirmed that I had withdrawn from the partnership.”
After the scheme was ruled to be invalid, Randell had to repay £114,000 ($159,421, €129,003) plus interest.
He admitted to the panel that his decision to invest in the scheme was “an error of judgement 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 wrote.