HMRC has decided not to renew its contract with US firm Concentrix after the company was accused of wrongly stopping the tax credits of hundreds of claimants.
The firm was handed a three year-contract with the tax authority in May 2014, and was tasked with identifying around two million tax credit cases that HMRC itself forecast would contain fraud or error.
But Frank Field, the Labour chair of parliament's Work and Pensions Committee this week urged the government to investigate concerns over the firm's handling of the contract, saying that people's lives had been "turned upside down as a result of Concentrix stopping their claim".
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The BBC reported on the case of Nicola McKenzie, who had her child tax credit payments halted after Concentrix wrongly accused her of being married to a 74-year-old dead man.
A parliamentary question from shadow Cabinet Office minister Louise Haigh last week revealed Treasury figures showing that Concentrix had failed to meet performance standards in 120 out of 1,625 instances, although the department said the contractor had "achieved the 75 day service level agreement throughout the contract period to date".
HMRC’s chief executive, Jon Thompson, announced on Tuesday that the government would not be renewing Concentrix's contract when it expires in May of next year.
“We want to reassure customers who have had their tax credits stopped that we will prioritise their cases, and make sure that they are processed as quickly as possible," he said.
“While it’s right that we ensure that tax credits customers only receive the money to which they’re entitled, it is vital that those customers have a high level of service.
“That’s why we have decided not to extend our contract with Concentrix and HMRC is redeploying 150 staff so that customers can get through to advisers and resolve any issues about their claim.”
Concentrix's current contract is worth between £55m and £75m and is structured on a "payment by results" basis.
A Concentrix spokesperson said the firm had "operated professionally at all times and within the guidance set by HMRC", and hit out at the tax authority for its statement.
"The HMRC statement not to renew the contract attacks our professional credibility, and the commitment of our staff who have performed determinedly, despite the issues with HMRC policies and procedures," the firm said.
It added: “In addition, throughout the contract, Concentrix has employed good hard-working people within the UK, at Concentrix expense, in order to staff phone lines and handle customer calls which were agreed by HMRC and were based on HMRC assumptions.
“To be clear, we have answered significantly more calls than planned with HMRC. Throughout the contract we have not been incentivised to make wrong decisions for claimants and, in fact, would be penalised heavily for failure to adhere to HMRC policies and procedures. Through the term of the contract we are pleased to have saved the taxpayer nearly £300m in authentic confirmed tax fraud and error which otherwise would have cost the taxpayer money."
But Field said he believed Concentrix’s "reign of terror" was now "drawing to a close". The work and pensions committee chair added: "Again the government has acted decisively in protecting vulnerable Britain. This holds out huge prospects and, for some exploiters, horror, in the near future.”