Planning permission is normally required for both the change of use and any associated operation development. In the old days the planning applciaiton form required you to state if the applciaiton was change of use only or for building operations as well. While it is unclear what the government intent was on this question, I would assume once prior approval is granted a similar a situation will apply as presently happens when moving within a use class for example using a greengrocers as a butchers is a change of use for which planning permission it not required but if the butcher wishes to change the shop front then planning permission can be required. Unless I am missing something in the new legislation as you state this would appear to apply to the new changes of use as the prior approval relates solely to the change of use not to any works that may be required to actually operate the change. The only logical method I can see is if an applciaiton for prior approval to change the use is issued then any works required to the exterior of the building or in the ground such as excavation, say digging up tarmac to create a garden etc, will still require a separate applciaiton for planning permission, unless the change of use is implemented first and the works fall within the permitted development rights of the new use. Though it is my understanding for the purposes of permitted development rights such as exterior alterations, building in garden flats do not constitute dwelling houses and have no permitted development rights. In relation to you case while I would have thought it would be better to apply for the prior approval first there is nothing that says he can apply for both at the same time but I think you would have to issue the pries approval to establish the use and then the applciaiton for the alterations considered. I believe as a prior approval applciaiton is not one seeking planning permission there is no ability to place conditions on such applications. If the work to implement the change of use can still require permission then it is going to be further fun. As with much of the new legislation there is a lot of confusion and time will tell.
