Really? I thought British citizen children did not count as they are eligible for benefits.
As far as I am aware, the whole 'British children don't count' thing was only introduced in July 2012 for the financial requirements under the new rules.
So, if the new rules requirements don't apply for people on DLA, then presumably they have to meet the financial requirements under the old rules, which had to include ANY children living in the same household, whether British citizens or not.
For example, under the old rules, if a US citizen was moving in with a UK citizen spouse and their 2 UK citizen children (whether they were from another relationship or they were the children of the US/UK couple), they needed to show £111.45 (couple) + £64.99 (child 1) + £64.99 (child 2) for the requirement. Now, under the new rules, assuming no exemption from the financial requirement, they would need to show £18,600 for the US citizen, but nothing extra for the UK citizen children.
In Annex FM 1.7 for the new financial requirements, it says that people exempt from the new requirements due to receipt of DLA have to meet the requirements set out in IDI chapter 8 section 1.7. Now, IDI chapter 8, section 1.7 seems to be about domestic violence, however section 1.8 is about Maintenance and Accommodation for spouses, and in that section, it states:
10. CHILDREN AND OTHER DEPENDENT RELATIVES
As with spouses and civil partners, we must be satisfied under paragraphs 297 (iv) and (v) and 298 (iv) and (v) of HC 395 that any children or other dependent relatives can be maintained and accommodated adequately, without recourse to public funds. This must be in accommodation that the sponsor owns or occupies himself and that he is able and willing to maintain them adequately without recourse to public funds. The same guidelines apply to dependants as with spouses and civil partners.
Care should be taken when considering refusing an application from a child or dependent relative on maintenance and/or accommodation grounds alone. Such cases should be considered on their merits and any compassionate circumstances should be taken into account. In cases of doubt the application should be referred to a senior caseworker.