In a statement (here) the Commission said it had asked the UK to amend its legislation. If the legislation is not brought into compliance within two months, the Commission said it may refer the matter to the European Court of Justice.
The seemingly perverse move is likely to baffle industry. A Treasury spokesperson said it "did not agree with the Commission" and "would not have introduced a reduced rate if we thought it was not allowed." Treasury will "study the Commission's argument carefully", she added.