An American company brought in to cut fraud and error in the benefit system will not have its contract renewed following complaints it wrongly cut payments to hundreds of claimants, HM Revenue and Customs has said.
HMRC chief executive Jon Thompson said Concentrix's contract to reduce fraud and error in the tax credits system would not be extended when it comes up for renewal in May 2017.
In a statement, Mr Thompson said that while it was important to ensure payments only went to those who were entitled to them, claimants were entitled to expect a "high level of service".
The move was welcomed by the chairman of the Commons Work and Pensions Committee, Labour MP Frank Field.
"Concentrix's reign of terror is drawing to a close. Again the Government has acted decisively in protecting vulnerable Britain," he said.
Mr Field was among a number of MPs to have called on the Government to investigate following a sharp rise in complaints from claimants that they were wrongly having their benefits stopped.
In one case a teenage mother complained her payments had been cut after she was wrongly said to have been married to a 74-year-old man who was dead.
Mr Thompson said the company and HMRC would now be focused on clearing the outstanding cases, with 150 HMRC staff being redeployed to help with the work.
"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 was originally awarded a three-year contract worth between £55 million and £75 million on a payment by results basis. HMRC said that so far it had secured £280 million of savings for the taxpayer.