Looking at www.csa.gov.uk/newcsaweb/index.asp found this:
"Working Tax Credit will be treated as income where the non-resident parent is the main earner. Where the non-resident parent and his partner have equal earnings 50 per cent of the tax credit will be taken into account as income of the non-resident parent.Child Tax Credit will be taken into account as income of the non-resident parent whether it is paid to the non-resident parent or their partner."
AND:
"Relevant other children
If a non-resident parent has children living with them in their current family, we will use a lower amount of net weekly income in working out child maintenance. This is the non-resident parent?s net income reduced by:
15 per cent if there is one relevant child;
20 per cent for 2 relevant children; and
25 per cent for three or more relevant children.
Example:
Graham and Theresa are divorced with one child who lives with Theresa. Graham lives with his new partner, Paula, and their two children. Graham?s net weekly income is £280. Because he has two children living in his current family, his net weekly income is reduced by 20 per cent (£56) before his child maintenance is worked out. Child maintenance is 15 per cent (because he has to pay for one child) of £224 (£280?£56) which is £34. Graham?s child maintenance is £34 a week. "
As far as I can see if your friends parteer is cohabitating then his income will be taken into account in calculating WFTC.
Your friends DD will entitle him to a deduction on the amount of child maintenance that he will have to pay.
Not clear as to what extent this interacts with the mortgage that he pays on the family house.