I too think that insurance is the real issue.
The worst the CAA can do is a prosecution, and this is exceedingly unlikely unless somebody does something overt, repeated, but most importantly provocative. For example, one idiot of a CFI explained to me how he could run a flying school using N-reg planes, and how he could do the same using Private CofA planes. I didn't believe his "workarounds" would work and the CAA would certainly jump on something like that once the word got out (which, in the typical GA training establishment atmosphere, would happen immediately). Also anything involving a loss of AOC revenue gets jumped on severely...
Getting back to insurance, surely making a full disclosure of the intended use to one's insurer is good enough. They have the best paid lawyers in the business.
I have put various matters to my insurer (typically stuff concerning recovery of expenses on a business flight) and usually they just say "OK".