The Child Poverty Action Group is challenging the Working for Families scheme at the Court of Appeal this week, arguing that it discriminates against the country's poorest children.
The group's spokesperson, Susan St John, says the in-work tax credit is supposed to be a work incentive but it is poorly designed.
Ms St John says about 230,000 children living in poverty miss out because their parents do not meet the stringent criteria.
She says the group wants the Court of Appeal to declare the tax credit unlawful under human-rights legislation, and the Government should then change the scheme to make sure all low-income children are treated the same.
The two-day case will begin at the Court of Appeal on Tuesday.