The UK is facing legal action in the European Courts accused of discriminating against citizens of other EU countries who claim benefits in the UK, reports the BBC.
The European Union believes that the UK's rules on claiming benefits discriminates against those from other EU countries and as a result is contrary to EU law.
The EU has created a standardised test that is supposed to be used by all member states when assessing the eligibility for citizens of other member countries to receive state benefit.
It is thought that the UK has added in an extra test for non-UK citizens, which effectively discriminates against those from other EU countries by restricting access to a number of benefits that should otherwise be available to them.
The 'right to reside' is a legal test that not only means you have permission to be in the UK but that you also have a right to live here. The right to reside depends on a number of factors including nationality, immigration status, circumstances of applicant and their family and rights to reside as per EU treaties.
The EU believes that UK policy is in breach of law and is now commencing legal action to take the UK to the European Court of Justice.
The Government believes that the measures are in place to protect UK taxpayers, and accused the EU of trying to 'water down' UK law.
"I will fight this every step of the way. I will not cave in and I will continue to work on strengthening our benefit system in the meantime to ensure it is not open to abuse by anyone," said Work and Pensions Secretary Iain Duncan Smith.
Even pro-EU ministers, such as the Liberal Democrat's Nick Clegg have said that the EU has 'got it wrong'.
"Of course we need to provide support to people who deserve it, who need it and who are entitled to it, but our benefits system is not a free-for-all and it shouldn't be a free-for-all," he told the BBC.
Charity Advice of Individual Rights in Europe said that the laws discriminate in a number of ways. They described a situation in which EU citizens who work legally in the UK and pay tax are then denied maternity benefits when they stop work to start a family, something that is routinely provided to UK citizens working within the EU.
Research by University College London has also revealed that the EU migrants pay 30% more in taxes than they take out in benefits each year.