My (limited) experience of doing practice IFR approaches at an airfield outside CAS is that the ATSU insists that you remain in VMC. This enables them to, for example, release an IFR outbound and just give traffic info to both parties.
Well that's the way we always used to do it when an IFR inbound needed to cross a practising aircraft's level: maintain VFR, and then the IFR vs IFR separation didn't apply.
But my reading of CAP 774 suggests that separation is only applied PS vs PS, not PS vs BS, as coolbeans says.
This was a case of incorrectly using the new procedures.
To be fair on the ATSU in question, I think it was more a case of a spontaneous realisation that the aircraft that elected to have a Basic service did so in a tone of voice that suggested that the crew did not, at the time, understand the consequences of the decision.
I don't think the inbound was in any way inconvenienced by being held above us temporarily -- the whole thing seemed like good sense. I just wanted to check my understanding of the procedures.
Thanks for the replies.