The Spanish bank is to be sued over the Imagine film-financing scheme that was part-funded by Alliance & Leicester, which it acquired at the height of the financial crisis.
Barclays also faces legal action over a similar scheme known as Timeless Releasing.
It is claimed investors in Imagine were invited to participate in the exploitation of Hollywood feature films from studios such as Disney in return for making one-off investments, over 80 per cent of which were funded by bank loans.
Along with similar schemes, it promised to enable clients to seek tax breaks. However, HMRC has since written to investors to state that it considers them to be a form of tax avoidance and they are now deemed illegal.
On Monday, lawyers acting for clients of Newport Tax Management, which is managing a class action, said they are preparing letters before action to be sent to Santander and Barclays over the schemes.
Nick Wood of Newport Tax Management estimates that across the financial sector as a whole, compensation claims could total as much as £11bn.
He added: “These are the latest examples of failed tax deferral schemes that were mis-sold on an epic scale. We are working with our partners at CFS Capital to secure significant funding in order to sue a number of other high street banks that provided financing and gave credibility to these types of investment.
“The majority of people who invested were not the super-rich, but hardworking individuals who believed it would entitle them to legitimate tax breaks. Instead, they lost all their cash and now face huge penalties from HMRC.”
Imagine and Timeless Releasing were both promoted by Future Films Ltd, the defunct company that was also behind a film-financing scheme known as Eclipse.
Solicitors at Edwin Coe have already sent letters before action to HSBC, Barclays, and Bank of Ireland as part of a £180 million lawsuit over Eclipse.
David Greene of law firm Edwin Coe, which is preparing the fresh letters, said: “The manner in which these schemes were marketed was shameful. In essence a wholly fictional creation was proffered as reality.
“Investors were told to expect income from film rights to pay off loans taken from banks and to provide further income. There were in fact no real loans and no income.
“Many hundreds of investors were affected with losses of £100 million.”
A Santander spokesman said: “We have yet to receive notice from Edwin Coe of any action relating to Alliance & Leicester but we will review the claim when we have further details.”