If this is a real concern then surely schools could 'fix' it by charging for the aircraft rental and the instructor charging each student for his services individually. The school could then charge the instructor a commission for 'finding' the students. Therefore the instructor would be able to clearly demonstrate that he has several clients and is thus self-employed.
You could then liken the case of the instructor to someone who polishes shoes at an airport for example. They pay the airport for the right to use the airport concourse to conduct their business. The polisher gets paid by multiple clients and is thus self-employed.
A bit more paperwork and invoicing required but surely it's worth the effort?
J