It's a lie.
Fullfact.org has done a detailed analysis of the piece here. The new EU directive applies to toy manufacturers and sellers, not users, and in any case simply repeats safety requirements that have been in force since 1988.
But it's much easier to make up stories about Eurocrats invading your Christmas party to take your children's toys away and put you in prison for letting them have balloons, than it is to report the truth. Heaven forbid that the British media coverage of the EU should actually be based on reality rather than fantasy. Luckily, with Bruno Waterfield covering Brussels for the Daily Telegraph, there is little chance of its readers' minds being polluted by actual facts.
Edited to add: according to this piece, the Mail and Express covered the story in similar vein, but I will not link to them.
Further edited to add: See also my ill-tempered twitter exchange with Bruno Waterfield, the journalist in question.