This is actually quite a complicated matter, and to assist you it will help if you download
this Public Funds document. The complication is confirmed by the sheer complexity, all those ticks and crosses, on the chart on page 6 of 7.
Unfortunately a read of that document will confirm that there is no "let-out clause" for you and your wife, and until you get your ILRs, there is no legal ability to claim any benefit within the Public Funds definition. And that includes Tax Credits, and DLA.
So as a matter of urgency you need to write to the respective offices and withdraw the claims. If you do so, when you get round to applying for ILR you will be pleased to read that the Public Funds question is written in the present tense ..... "Are you receiving ..." ... and thus your honest and correct answer with then be "no".
Part of the history of this is the sheer incompetence of UKBA, or whatever it was calling itself at the time. The definition of Public Funds in para 6 of the Immigration Rules does get changed from time to time, as benefits come and go, but whilst Tax Credits started to be paid from April 2003, it was not until February 2005 that the definition of Public Funds was altered so as to include Tax Credits within the definition. And indeed at the beginning of Tax Credits where was not even a "Are you subject to immigration control?" question on the Tax Credits application form.
So it does not surprise me at all that when you applied for Tax Credits, before 2005, that the claim was granted and the money started to be paid. Now if HMRC, who administer Tax Credits, were awake to the change in the Public Funds definition, in February 2005, they would have tried to ascertain who might be affected, and then stop their payments. But they made no such attempt. And it would have been easy for them to check. You get an annual renewal form. Why no "Are you subject to immigration control?" question on the Tax Credits renewal form?
As regards DLA, I can't explain why that claim was agreed, unless someone erroneously thought, ah they are getting Tax Credits so it must be OK to claim DLA as well.
The important thing now, and in writing, is to withdraw the claims without delay. There is no need to offer to repay the money .... just a very simple almost one sentence letter, quoting the relevant reference, and saying something like "I hereby withdraw the claim to ...... ". Actually the Tax Credits one needs to come from both of you, and be signed by both of you.
