The CAA have no control over the interpretation of the rules by other National Aviation Authorities however at a recent EASA meeting the vast majority of NAA confirmed that they would consider the licence as defaced if it was cut up.
It follows on from this that if a ramp inspection was carried out by one of those NAA inspectors then they would consider your licence invalid and refuse to allow you to proceed.
Therefore the advice from the CAA is based on their interpretation of the rules and the consensus of other NAA. For the CAA to say that it may be okay to cut up your licence would be ludicrous, consequently in order to ensure that your licence is definitely considered as valid the CAA say that it should not be cut up. If you then choose to cut up your licence (despite advice from the CAA to the contrary) and a flight gets delayed then it probably will not be viewed favourably by your employer.