Maxflyer:
You are right and your example shows the ultimate false logic of the Revenue's position. I know of one chap who's business plans have been seriously hampered by the Revenue's attempt to charge him with the full cost of his company aircraft. He flies all over Europe strictly on business. The revenue argument was that there was a benefit in kind, not only because he could keep current on his aircraft (a twin) but because there was likely to be a private element to his trips. They suggested he might do a bit of sightseeing or having a social meal out!!
There is no logical reason why a flying instructor flying his employer's aircraft and deriving pleasure from his instructional flights should not be charged a benefit in kind whereas a business man flying his employers aircraft for business is. What about, say, a gof pro who uses his employer's golf course of teaching and derives not only personal satisfaction but the opportunity of refining his skills? The list is endless.
I would love to hear from someone who has taken the Revenue on and won. The trouble is most of these cases are compromised - a level of understanding tends to be reached to avoid future problems, so the issue is never tested in the courts.