The UK is said to be closing in on a deal that would allow it to deny in-work benefits to people from other parts of the EU for up to four years.
A source close to the negotiations with the EU said it would mean the UK could put an “emergency brake” on payments.
The UK would have to show its welfare system was overwhelmed and it would need approval from a majority of EU states. They could also use the brake.
David Cameron is due in Brussels later for talks on his EU renegotiation aims.
The restriction on in-work benefits for EU migrants is one of the prime minister’s key demands for reform in his renegotiations of the UK’s EU membership.
Under the arrangement being discussed, the European Commission would perform tests on the claim to apply the brake, but the final approval of whether it could be applied would rest with a majority decision of the union’s 28 states.
The source said the arrangement would require a change to EU legislation, but not a change to the EU’s founding treaties – something seen as politically and practically impossible in the UK government’s timeframe.
Mr Cameron is due in Brussels to discuss the issues with the presidents of the European Commission – which is in charge of the EU’s rules and regulations – and the European Parliament.
Any potential deal would still have to be agreed by all EU leaders at a summit in February.
Downing Street sources urged caution over reports of any breakthrough.
They say the prime minister is still prepared to walk away from the February summit without a deal if he judges that it is not good enough for Britain.
David Cameron’s four main aims for renegotiation
- Economic governance: Securing an explicit recognition that the euro is not the only currency of the European Union, to ensure countries outside the eurozone are not disadvantaged. The UK wants safeguards that it will not have to contribute to eurozone bailouts
- Competitiveness: Setting a target for the reduction of the “burden” of excessive regulation and extending the single market
- Immigration: Restricting access to in-work and out-of-work benefits to EU migrants. Specifically, ministers want to stop those coming to the UK from claiming certain benefits until they have been resident for four years
- Sovereignty: Allowing Britain to opt out from further political integration. Giving greater powers to national parliaments to block EU legislation
Referendum timeline: What will happen when?
Number 10 said Friday’s talks with European Commission President Jean-Claude Juncker would look at the “totality” of the renegotiations, not just the PM’s most contentious demands on migration and welfare.
Once a deal on Mr Cameron’s proposed reforms is reached, the UK will hold a referendum on its EU membership – promised by the end of 2017.
Mr Cameron has said he is “hopeful” of an agreement at February’s European Council summit.
There has been strong opposition to his demand for a four-year freeze on working-age benefits for EU migrants as part of his bid to reduce the numbers coming to the UK.
The emergency brake alternative was discussed in talks with Czech Prime Minister Bohuslav Sobotka last week.
However, precise details of how this could work have not been set out and nothing has been agreed.
Asked about the “emergency brake” on a visit to Aberdeen on Thursday, Mr Cameron said the four-year proposal remained on the table until “something equally potent” was put forward to prevent new arrivals from getting “instant access” to the welfare system.
“But what’s good is that others in Europe are bringing forward ideas to address this problem so we have better control of movement of people into our country,” he added.
Mr Cameron is also due to have a working dinner with European Council President Donald Tusk in Downing Street over the weekend, and will hold talks with German Chancellor Angela Merkel before the summit on 18 February.