The Court of Appeal has dismissed an appeal by the Child Poverty Action Group (CPAG) challenging the Working for Families tax credit.
CPAG told the court during a two-day hearing in May that about 230,000 children were disadvantaged as their parents were not eligible for the credits because they were on income tested benefits.
It wanted the Court of Appeal to declare the tax credit unlawful under human rights legislation.
The Crown argued it was necessary to distinguish between beneficiaries and working families to encourage people into work, and said other payments were available to beneficiaries.
The court on Friday released its finding, in which it ruled the requirement subjected beneficiaries to treatment which amounted to a material disadvantage but said that did not breach the Bill of Rights.
CPAG had already lost the case at the Human Rights Review Tribunal and the High Court.
