But John Bates, 30, denied that was the reason he had helped detectives form a case against the man accused of the boy's murder.
The confessed heroin dealer told Preston Crown Court that from May last year, four months before the shooting that left him wounded and Dillon dead, he had been an informant for Lancashire Police.
The Crown alleges that Dillon became an innocent victim of a bungled attempt by Paul Seddon, 27, to kill Mr Bates.
Mr Seddon, of Chorley New Road, Bolton, denies murdering Dillon and attempting to murder Mr Bates in August last year.
With him in the dock areDavid Hargreaves, 24, and Craig Hollinrake, 25, of Breightmet, and Brian Roper, 22, of Harwood. They all deny conspiring with Mr Seddon to murder Mr Bates.
Mr Bates, who was walking home holding Dillon's hand when they were shot, claimed he was targeted because he had refused to comply with demands from Mr Hargreaves and a man called Billy Webb to sell drugs for Mr Webb.
In the third day of the trial yesterday, Mr Bates denied to David Fish, QC, defending Mr Seddon, that he had been offered immunity by police on August 14, the day before naming Mr Seddon as the killer for the first time in a statement.
He later picked Mr Seddon out at an identity parade.
The case continues.