Hi OP,
I work in a school and oversee FSM applications and implementations on a daily basis. The information I'm giving you is based in England.
The last sentence of your first paragraph really doesn't sound right to me -
I have 2 children in primary school, when the older one went into year 3 I applied for him to get free school meals as I was entitled to. At the same time the youngest started reception and advice I'd seen online was to apply for them to get it anyway as the school would receive extra funding for them. I tried but couldn't as they were already entitled to the universal meals.
Whoever said you couldn't apply for FSM for a FS2 child was wrong.
All FSM applications are dealt with by your local council, they review all the information provided to them on the application form then their decision is notified to the school. At this point the school should update their pupil database accordingly.
Always bear in mind that there are 2 FSM databases, the one held by your local council and the one held by your school.
Schools like to have high numbers of FSM children as it increases their funding through the Pupil Premium and Ever 6 grants but it also gives them "excuses" when they may have to justify or explain low attendance or poor test results based on specific demographics. Rightly or wrongly this is the case and I've worked with it for 20+ years. School Inspectors always look at PP and Ever 6 for indicators of deprivation in the school.
Having read your post I think I have an idea as to what may have happened. It sounds like an application went to your local council for your older child which was accepted - your younger child was not included on the application so did not receive FSM status.
Once the council notification was sent to the school, the school then incorrectly added your youngest child to their own FSM database. This then increased FSM deprivation numbers, increased their PP funding (which is done via the annual school census) and also allowed you to (incorrectly) receive the shopping vouchers.
I suspect your school has recently done an audit and cross referenced their FSM database with the one that the council hold. This is where they will have spotted the error and legally the school must correct it.
As an aside all current FSM children currently have their status legally protected until at least 31.3.23 so no legitimate FSM child can have their status withdrawn until then.
Once again it brings us back to the incorrect information you were given at the start of your application process - do you have any evidence to present to the school to show you were wrongly advised?
Without that evidence I think it will be hard for you to move forward with an application being in mind you no longer fit the FSM eligibility.
I hope this all makes sense to you as I'm typing in 35 degree heat and my thoughts don't appear to be coming across too coherently!!
Good luck as you move forward with this.