The US firm was awarded the contract, which was worth up to £75m over three years on a payment by results basis, in May 2014. HMRC has now said it has decided not to extend its existing contract.

At the time, the government said bringing in an external organisation to check tax credit claims and identify cases of fraud or error would deliver £1bn over the life of the contract. HMRC is now reporting that so far this contract has secured just £280m of savings.

Over the remaining period of the existing contract, both organisations will now be focused on clearing the outstanding cases. HMRC is redeploying 150 staff to help with this work.

The National Audit Office (NAO) sounded a warning note about the Concentrix contract shortly after it started, in its report on HMRC’s 2014-15 accounts. The watchdog pointed out that HMRC estimates suggested the project delivered savings of £500,000 in 2014-15 in its first year of operation, compared with its original forecast of £285m.

On this basis, the NAO said the original estimate of £1bn savings over the three year contract was not achievable, and reported that HMRC estimated the project will deliver savings of £423m, although this relied on increasing staff numbers and improving performance.

The following year, NAO reported that HMRC had changed the arrangement with Concentrix during the year and more benefits were being realised, with savings of £147m achieved in 2015-16.

In addition Concentrix has faced increasing levels of criticism from members of the public and MPs over claims that its investigations were based on inaccurate information, resulting in lower paid workers losing benefits incorrectly, and that the company was difficult to contact making it hard to address any inconsistencies.

The Treasury has said it has identified 120 cases since last October where Concentrix did not ‘fully’ meet the performance standards laid out in its contract.

Frank Field, chairman of the work and pensions select committee, described the company as operating ‘a reign of terror’ and said: 'Decent people's lives have been turned upside down as a result of Concentrix stopping their claim.'

A study by the social security and advisory committee, published in July, on decision making and mandatory reconsideration across government included a section on Concentrix. It noted that details of the payment model used in this contract are not in the public domain due to ‘commercial sensitivity’.

However, the report stated: ‘Payment by results implies the greater number of “corrections” to claims Concentrix makes the higher its revenue will be. When claimants disagree with a decision and request a mandatory reconsideration it could be argued there is an incentive for Concentrix staff not to overturn decisions given it would impact negatively on their revenue.

‘Put another way, the profit motive could reduce the ability of the contracted out organisation and its staff to be impartial when reconsidering decisions. It should be noted that if a decision does progress to appeal and is subsequently overturned, Concentrix will not receive payment but for reasons outlined earlier in the report claimants may not always progress their cases.’

The NAO’s 2016-2016 report found that around 0.13% of Concentrix interventions resulted in appeals via tribunals, where more than half found in favour of the taxpayer after previously requested information was given to HMRC.

Commenting on the decision not to renew the Concentrix contract Jon Thompson, HMRC’s chief executive, said: ‘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.

‘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.’

In its response, a Concentrix spokesperson said in a statement: ‘We have operated professionally at all times and within the guidance set by HMRC. 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.

‘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.’