I'm pretty sure that they mean current rating, 500 hours TOTAL time on type, with your last flight within the last 12 months. Thats what they said last time round - "latest flight within the last 12 months"
I'm in the same boat as you, got a couple of thousand hours continuous experience on type, am still employed and working but not 500 hours in the last year as its been a pretty lean year.
The application form is not automated in this respect anyway - so it won't get automatically bounced.
It's got a few 'freeform' text boxes that ask for a breakdown of your total hours in various forms, and also the dates of your most recent LPC and OPC.
Guess they make a decision from there.