The move could lead to a collision with the European Commission, the Daily Telegraph reported.
Work and Pensions Secretary Iain Duncan Smith said Thursday the government hopes to block "benefits tourists." The expanded "habitual residence test" to be introduced next week will include questions about immigrants' ability to speak English to determine if they could actually get and hold a job in Britain.
"The British public are rightly concerned that migrants should contribute to this country, and not be drawn here by the attractiveness of our benefits system," Smith said. "We are taking action to ensure this is not the case."
The test is a list of questions officials at Jobcenters can ask to determine if someone qualifies for Jobseeker's Allowance, the benefit most used by immigrants.
An EU diplomat told the Telegraph discriminating against immigrants based on their language skills is illegal.
"It seems the government wants to step up the fight," the diplomat said. "I hope Mr. Duncan Smith has good lawyers or Britain could be paying some big fines."