Media playback is unsupported on your device Media caption Nicola McKenzie says she is struggling to feed her two-year-old son

Concentrix, the US firm accused of incorrectly withdrawing tax credits from hundreds of claimants, will not have its contract renewed, HMRC says.

The firm, employed by the government to cut tax credit fraud and overpayment, will, however, complete its current contract which expires in May 2017.

In the eight months until then Concentrix will work on clearing outstanding cases, said HMRC.

Concentrix said it had operated "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," said a spokesperson.

Concentrix won a £75m contract to try to save the government more than £1bn in incorrect or fraudulent tax credit payments in May last year.

Wrongly accused

But in a statement on Tuesday, HMRC's chief executive Jon Thompson 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."

The Treasury has revealed 120 cases since last October where Concentrix did not "fully" meet the performance standards laid out in its contract.

But it is feared the actual number may be higher. The Facebook campaign group Concentrix Mums, which has 5,600 members, says hundreds more people have been affected by errors.

Labour MP and chairman of the Commons Work and Pensions Committee Frank Field, who had urged the government to investigate concerns over Concentrix, welcomed HMRC's decision, saying the firm's "reign of terror" was coming to a close.

"The government has acted decisively in protecting vulnerable Britain. This holds out huge prospects and, for some exploiters, horror, in the near future," he added.

Image caption Sharon Scargill said she had £20 to last her two weeks

The BBC earlier reported the case of Nicola McKenzie, a teenage mother who had her child tax credits stopped after she was wrongly accused of being married to a 74-year-old dead man.

Tax credits - the Child Tax Credit and the Working Tax Credit - are government payments made to households on low incomes.

Concentrix's government contract is based on a payment-by-results model, with the "maximisation of revenue flows" as one of its key requirements - meaning it makes more money if it cuts more payments.

But a spokesperson for the firm said it had not been incentivised to make wrong decisions for claimants.

The spokesperson added: "In-fact [we] 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".