Whoppity, where does it say that?
I understand the PPl FI will not be able to teach for a CPL as they must hold the licence for which they are teaching for. However I have not seen anything that prevents a PPL FI teaching someone who holds a higher licence or an examiner for testing.
According to the bods in FCL the only thing a PPL FI will not be able to do is train or test for a CPL. Everything else is acceptable according to them. So is this an interpretation on your part or is there something specific from the CAA?