The European Union is set to take Britain to court over benefits for migrants – setting the Government on course for a battle with Brussels.
The European Commission has accused Britain of discriminating against EU nationals who have been living and working in the UK.
The Commission says tests applied to check if claimants are eligible for benefits are unfair.
It is expected to announce details of an “infraction” procedure against Britain, which would lead to a court case in Luxembourg.
But Iain Duncan Smith has vowed not to “cave in” to any demand to ease restrictions on migrants’ access to benefits.
A source close to the Work and Pensions Secretary said: “He will not be dictated to on what he can and cannot do.
“It is his responsibility to do all that he can to stop abuse and benefit tourism in this country.”
The EU has a standard test, which is supposed to be applied by member states to determine a migrant’s eligibility for welfare payments.
The UK applies an extra “right to reside” test, which the EU says is discriminatory and may have denied thousands of migrants access to benefits like child tax credit.
A government spokesman said: “The ‘right to reside’ part of our habitual residence test is a vital and fair tool to ensure that benefits are only paid to people who are legally allowed to live in Britain. We have always been clear that we believe our rules are in line with EU law.”
The legal action will cast doubt on whether the coalition will be able to move forward with plans to clamp down further on benefits claims by migrants.
Ministers have put forward plans to restrict access to legal aid and charge EU migrants for access to some elements of NHS care.
There have also been proposals to restrict benefit payments for migrants who fail to find work.
If the court case puts the brakes on those plans, MPs including eurosceptics, who already believe Brussels interferes too much with UK domestic policy, are likely to be outraged.
Britain may get backing from Germany, the Netherlands and Austria if the issue ends up in court.
The Home Secretary Theresa May co-signed a letter with her counterparts from those countries in April, complaining that the current EU regime for tackling benefits tourism was too soft on cheats.