In an engine installed in an aircraft used for flying training/private hire, the engine can be operated in 'extension' but must be overhauled at TBO +20% hours and/or calendar time, whichever occurs first.
You cannot offer non-private instruction (i.e. an EASA ATO or RTF) on an aircraft when the engine is operated on condition. So on a Lycoming IO360 for example that would be 2000hrs TBO + up to 400 hrs extension OR 12 years. However in a flying school environment the calendar time is likely to be irrelevant on anything other that an aircraft purchased with a significant amount of time since last OH.
Flying Frog hinted that the 20% extension also applies to calendar time but I don't believe that is the case, the extension only applies to TBO hours.