Don't let them get away with that!
Refer them to the new Home Office guidelines for firearms licensing published in November 2013 and found here:
Direct them to page 112, Paragraph 13.58 which states:
"Ammunition may be collected of itself, including expanding, incendiary or armour piercing ammunition or explosive that otherwise would be prohibited under Section 5 (1A) of the 1968 Act".
Incidentally, this seems to support the contention that a separate Section 5 authority is not needed!