Tax credit claimants who had payments wrongly stopped by fraud-busting firm Concentrix have received almost £87,000 in compensation from HM Revenue & Customs, a report has revealed.

Some 35,000 people whose tax credits were cut off or changed by US operator Concentrix later had their cases overturned on appeal, a report published today by the National Audit Office (NAO) spending watchdog has found – almost a third of the 108,000 total.

Many of those left out of pocket when payments ended then struggled to reach Concentrix to discuss the problem, the report added.

By mid-December last year, HMRC had paid out £86,815 in compensation payments to claimants whose cases were mishandled by Concentrix, including almost £68,000 for worry and distress caused.

The tax credit administration shambles emerged last August when large numbers of claimants told how their payments were being adjusted or stopped by Concentrix – in many cases because it mistakenly suspected them of living with a partner. In one particularly bizarre case, a woman was reportedly left reliant on food banks after the firm accused her of cohabiting with 19th century philanthropist Joseph Rowntree.

What was Concentrix hired to do?

In November 2014, Concentrix was hired by HMRC to reduce fraud and error in the tax credit system as part of a three-year deal. But the deal was brought to an end just two years later as a result of the problems.

During the two-year life of the contract, Concentrix saved the Government less than a fifth of the £1 billion in savings originally estimated. The contractor was already failing to meet half its targets less than a year into the deal, the NAO said.

In light of the problems, HMRC has now vowed not to outsource tax credit investigations again and will instead keep them in-house.

What does the report say?

The NAO report spelled out the difficulties caused to families by Concentrix's poor behaviour.

It said: "In August 2016, MPs and the public raised concerns that Concentrix had incorrectly suspended or terminated a number of claimants' tax credits awards. For example, Concentrix mistakenly believed claimants were living with individuals unconnected to them. Substantial numbers of claimants also had difficulties contacting Concentrix to discuss their awards.

"It became clear the contract was not working as HMRC intended. Concentrix was not working on as many cases as HMRC had expected or meeting performance standards. In November 2016, HMRC and Concentrix agreed to end the contract and a number of Concentrix staff transferred to HMRC."

The report also found that the contract with Concentrix delivered estimated savings of £193 million against a payment of £32.5 million. However, Concentrix told the NAO that it had made a loss of £20.5 million on the contract.

What does Concentrix say?

A Concentrix spokesperson said: "We welcomed the opportunity to engage with the National Audit Office in its inquiry. This was a hugely complex contract and programme, and as the report highlights, a number of issues emerged at the outset which laid the foundations for the challenges experienced throughout, particularly last year.

"We look forward to discussing the report with the Public Accounts Committee in order to ensure all lessons can be learned."

Senior staff from the firm as well as from HMRC are due to give their account of what went wrong before MPs later this month.

Victims of Concentrix tax credits shambles receive almost £87,000 in compensation
We've had several separate reports of people receiving compensation – typically ranging from £50 to £100

What does HMRC say?

HMRC said it was committed to paying tax credit claimants "all the money to which they are entitled, efficiently and on time" and it terminated the Concentrix deal "when it became clear it was not delivering the quality of service we expect for our customers".

A spokesperson said: "We apologise to all those who did not receive the standard of service that they should have.

"The vast majority of people who asked to have Concentrix's decision reviewed have now had their payments reinstated where that decision was wrong."

What are others saying?

MP Louise Haigh – who has championed the cause of those affected by Concentrix's decisions in the House of Commons – criticised Concentrix and HMRC on Twitter:

I'm affected by this issue – what should I do?

If your credits have been cut, appeal that decision first

It's important to understand that if you want to try to claim compensation, this is a separate action to appealing the decision to cut your credits.

If you believe your tax credits were wrongly stopped you need to first go through HMRC's appeals process – see our Concentrix help guide for more info on how it works. You can ask HMRC's tax credit office for updates on your case by phoning it on 0345 300 3900 or using its webchat service.

If you're still having problems, some claimants have had success getting their MP involved. Find out who your MP is and how to contact them via the WriteToThem website.

After you've done that, separately consider if you could be due compensation, and follow the tips below.

Who can claim compensation on top of backdated payments?

There's no clear-cut guidance on this, but HMRC says it will pay redress "where it is evident that Concentrix have made a mistake or that their actions have caused undue worry or distress".

You can claim for compensation now even if you've already appealed a decision to cut your credits and had payments backdated.

We've had several separate reports of people receiving compensation, with the typical amount awarded ranging from £50 to £100.

How do I claim compensation?

If you want to try to get compensation for the inconvenience you've experienced, you'll need to file a complaint. To do so, HMRC says you should write to it, clearly setting out:

  • How long you had to wait for your case to be dealt with
  • How you feel your case was handled
  • Any stress or ill effects on your health it caused you
  • Any difficulties you experienced
  • Any costs (eg, bank charges, phone charges) directly incurred while your case was being dealt with
  • Any other information about the hardship you've faced that you think validates your complaint

    While those successful in their compo claims haven't necessarily asked for a set sum, if you believe you should be due a specific amount (for example, because you incurred certain costs), it's worth making that clear in your letter.

    The address to write to is: HM Revenue & Customs – Tax Credit Office, Preston, PR1 4AT. Your complaint will be handled on an individual basis by a dedicated complaints team.

Additional reporting by Sam McFaul.