The IAA would not be able to issue a new EASA licence whilst the UK EASA licence is still held by the applicant however; the IAA has no authority to cancel that licence and should return it to the UK CAA for cancellation. Hopefully, they would then return it to the origial holder endorsed with a cancelled stamp. Somehow I am not sure they do this any more. I have one licence that has a CAA cancellation stamp on it, but I have not seen another in the past 25 years.