Also not an expert, but I suspect you're reading that regulation incorrectly.
The phrase in question is "This does not apply to the holder of a UK PPL(H) who qualified prior to 1 January 2000 under national arrangements". I suspect you're interpreting this exemption as applying to the phrase "cannot receive payment for this service" - i.e. if you received your PPL before that date, you are allowed to get paid for it.
I think the intention, though, was that the exemption applies not to the payment, but to the whole act of instructing? In other words, if you obtained your PPL before that date, you are not allowed to instruct at all? (Presumably you need a CPL to be able to instruct, whether for payment or not, if your PPL was issued before 1 Jan 2000?) That would be the way I'd read the bit you've quoted, anyway - but that doesn't mean I'm correct.
FFF
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