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Do the parents have settled status?
Then the child can apply for naturalisation as a British citizen using form MN1.
It’s an online application as you both settled status she will qualify.
Even if the child was born and you did not have settled status at time as you do now the child can apply. I will send you the MN1 guidance.
When she applies for naturalisation as a British citizen she can then proceed to apply for British passport. I’m not sure about the advice you received but I can only advise as per the law on this.