This area is covered by two sets of regulations:
The Civil Aviation (Working Time) Regulations 2004, which applies to Commercial Air Transport and restricts air crew (flight and cabin) to 900 hours Block Time in any rolling 12 month period. They do not apply to aerial work, including instructing.
The Working Time (Amendment) Regulations 2003 does apply to aerial work and governs working time (of any description) to a maximum of 48 hours per week averaged over a 17 week period.
Flying instructors, whose main job is flying instructing, would be governed under the second set of regulations.
Commercial aircrew would be governed under the first set and the probability is that any flight instruction outside their primary employment would be counted towards the 900 hours.
Saying that, these are new regulations derived from EU directives, which have caused significant debate already, e.g. stand-by time counting as full or half block time, and the regulations have never been tested in the Courts, which will probably be the deciding factor.
I couldn't see the authorities rushing to prosecute any commercial aircrew exceeding the 900 hours by doing a bit of instructing on their days off so in the meantime, it would probably be down to the employer to permit (or not) commercial aircrew to instruct on their days off.
This probably doesn't help much but the fact is that this area is still relatively new, the regulations (as with most EU derived legislation) is very nebulous and open to interpretation - God bless the EU and Roman Law - and still remains to be tested.
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