Interesting story. I assume that your daughter is a British citizen - It actually states that in her British Passport.
No idea what the person in the Job Centre was waffling on about - your citizenship is not defined by where you have recently worked. Whoever it was in the Job Centre they should have been informed having stated what they said was that the question would be referred to the Home Office who would formally ask the Department of Work and Pensions why they were stripping a British Citizen of their nationality.
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sj