The reference for this that you can quote is in CAP 393 Air Navigation Order, get the latest version from the CAA website at
http://www.caa.co.uk/docs/33/CAP393.PDF
The bit to look at is Section 1 / Part 4 / Paragraph 26.4.a:
"For the purposes of this Part of this Order:
(a) subject to sub-paragraph (b), a licence granted either under the law of a
Contracting State other than the United Kingdom but which is not a JAA licence
or a licence granted under the law of a relevant overseas territory, purporting in
either case to authorise the holder to act as a member of the flight crew of an
aircraft, not being a licence purporting to authorise him to act as a student pilot
only, shall, unless the CAA gives a direction to the contrary, be deemed to be a
licence rendered valid under this Order but does not entitle the holder:
(i) to act as a member of the flight crew of any aircraft flying for the purpose
of public transport or aerial work or on any flight in respect of which he
receives remuneration for his services as a member of the flight crew; or
(ii) in the case of a pilot's licence, to act as pilot of any aircraft flying in
controlled airspace in circumstances requiring compliance with the
Instrument Flight Rules or to give any instruction in flying;"
Now... this is all very well but what about the class ratings, how do we find out which aircraft those of us with FAA PPLs can legally fly? Is it defined by the FAA's Single Engine Land class, or by the JAA's Single Engine Piston? What about aircraft only certified in the UK? What about microlights which would be SEL in the US but require a microlight rating in the UK?
Any answers?