The scheme has backfired for some of those it was meant to help the most

NACAB spokesman

It also found that some parents were sacked from their jobs because employers believed the tax break caused them too much hassle.

The credit gives around one million families about �20 a week in relief from income tax and is designed to take many out of poverty.

Worse off

However, the study found that some families were worse off because of it.

It found that parents felt "cheated and misled" when they discovered they had lost free school meals and help with their rent and council tax.

The benefit has also failed to ensure that parents were always better off in work, the study said.

The report was based on over 700 case reports from citizen advice bureau offices across the country.

Backfired

A NACAB spokesman said: "The report shows the scheme has backfired for some of those it was meant to help the most.

"In the worst cases employers have sacked workers entitled to the pay boost or cut their hours because they want to avoid the red tape of paying through the wage packet."

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The report cites an example of a lone mother with three children who lost her job when the tax credit was routed through her pay packet.

The spokesman added: "It has failed to ensure that parents will always be better off in work than on benefits.

"The report shows that it is those people working faimilies tax credit should be helping the most - those moving to low-paid part-time work - who are experiencing the greatest problems with the scheme."

'Makes no sense'

The Citizen's Advice Bureau said the credit should be paid directly by the Inland Revenue instead of employers.

It added that the credit should allow families to retain certain entitlements such as free school meals within specific income bands.

David Harker, NACAB chief executive, said: "It makes no sense that the scheme that sets out to make work pay is making it more difficult for some people to stay in their jobs, and leaving some families worse instead of better off."

He added: "The scheme should not put jobs at risk or trap people on income support."

A Treasury spokesman said 700,000 families were receiving the WFTC through their wage packets, 1.1 million people were getting it in total, and all were an average of around �30 a week better off compared to family credit.

The spokesman said the government was worried about reports of staff being discriminated against because of the credit.

But he said only "a handful" of such cases had been reported to the NACAB.

The credit is expected to be replaced in 2003 by an employment tax credit and an integrated children's credit.