Although this is not really answering the OP, the problem with this hgv licence renewal thing is that there appears to be no way to have a physical, ie plastic card, licence that covers categories you are still entitled to whilst you are renewing your hgv entitlement and it is held up for medical, or whatever reasons that are related only to hgv entitlement.
Last time I did my 5 yearly renewal I started the process in good time but I have bad “white coat syndrome” so it is impossible to obtain a sensible BP reading done under duress, my doctor signed that she was happy with home readings (including a video of me taking readings 
) I sent the form away with my licence, which I think the form demands. Because this then became a "non-standard / non-compliant application it gets held up. On the telephone DVLA give me an estimate of several weeks before it is resolved. I was not desperate for the hgv entitlement but was desperate for a plastic card licence as I had a few euro trips to do in the car. DVLA advice was that you are OK to drive, even hgv’s because your doctor says you comply and your application is with DVLA . DVLA will issue, for free, a letter that says you are fully entitled to drive car etc. I pointed out this was likely to be completely useless when in conversation 
with gendarmes, carabinieri, swiss border police etc. or to hire a car at a foreign airport. I was told the only way is to write to DVLA and withdraw your hgv renewal application. They will then issue a “car” licence and you can restart the hgv renewal again later with a new D4, with which you have to send your plastic licence card…
In the end I only had to go to France in my own car so winged it with a blown up photocopy of the licence I had sent away 
Never got stopped so cannot tell what outcome would have been, lots of faffing and phone calls to DVLA, probably
I am not exactly sure what the OP’s situation is but possibly somebody at DVLA has decided to try and impose some extra rules of their own, like they are prone to do.
Why on earth they need you to return the old licence when all that card does really is give the police or whoever a number to check you out against I do not know. If you say you lost it they just issue another as far as I am aware.