Two accountants accused of devising a fraud to claim around £1m in gift aid were found not guilty at Liverpool Crown Court earlier this week after the prosecution dropped the case against them.

Edward Watkin Gittins, chief executive of Montpelier Tax Consultants, and Martin Calcutt, a former director of the firm, had been charged with fraud worth £1m relating to a scheme that involved a taxpayer making a gift of government bonds to a charity with an option to buy those bonds back for a nominal sum.

The criminal investigation began in 2007 and raids at Gittins’ offices in 2010 resulted in the closure of Montpelier Tax Consultants. The Crown Prosecution Service brought charges against both men in August 2013.

Mark Spragg, consultant solicitor at Keystone Law, who was representing Watkin Gittins, said that the plan, which was closed down by HMRC in 2004, achieved “a legitimate tax saving for the taxpayer” and “a welcome fee for the charity” which had saved it from “complete financial failure”.

He accused the CPS of a “humiliating climb-down” and said: “The only consequence has been the closure of a legitimate tax planning business and the loss of the jobs of the ordinary individuals employed by it. On a number of occasions over the course of the investigation, and in substantial written representations, we have tried to point out to HMRC that it never had a case but HMRC officers failed to engage with us. “

The CPS said that new evidence came to light during the trial, which was what prompted it to ask the judge to direct the jury to acquit both men after deciding to offer no further evidence.

A spokesman for the CPS said: “The decision to prosecute this case was the right one. When we took that decision in August 2013, we determined that there was sufficient evidence for a realistic prospect of conviction, based on the material provided to us by HMRC and the defence at the time.”

“Two weeks into the trial, during cross-examination of prosecution witnesses, the defence produced material which had not previously been provided to us. In light of the resulting evidence from the witnesses, we decided to offer no further evidence. The judge made no criticism of the prosecution’s decisions in this case.”

HMRC declined to comment.