The 7 year concession rules applies to children and not adults. There for I require the following information:
How long have you and your child been resident in the UK?
What you would need to do now is apply for indefinite leave to remain for your daughter whilst stating yourself as her only parent. If you have been a legally resident in the UK for over 10 years then you will also be allowed to apply for indefinite leave to remain.
Unfortunatley, you are unable to obtain citizenship through your mother as you are over the 18 and therefore, are considered a separate family unit. If you have not yet been legally in the UK for 10 years then when you apply for your daughter's indefinite leave to remain you should state that you have nothing to go back to in your home country and therefore, you will need to reside here to look after your daughter.
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If you have been in the UK for 10 years legally you can apply for ILR and add your daughter as your dependent and she would also get ILR - By filling in the SET(M) form.
If you would like to apply for ILR for your daughter and state yourself as her parent on the form then if you daughter obtains ILR you would obtain discretionary leave to remain for 2 or 3 years. This will give you a more settled status then your current leave to remain.
The best option would be you applying yourself for her to be given ILR, this will show that you are her parent and are taken decisions on her behalf and are attached to her emotionally. It would however, be worth mentioning in the application that your daughter's grand mother is British.
If your mother does the application on her behalf, it would lead the UKBA to believe that she is responsible for her not you. In addition you are her parent so the application would have to come from you.
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