Staywet,
I get the feeling that you're only really concerned about the VAT element. You need to consider both the VAT and the flying. It's quite clear you've some experience of VAT, and one would therefore presume you have access to an accountant? Best advice is to run your ideas concerning VAT past that accountant. As for the flying, please have a look at the link I suggested - it is the CAA guidelines on what constitutes commercial (aka Public Transport) flying.
A £350 gift is too obvious
No disagreement there
So I have introduced a vatable product, eg a photo.
You have but you've completely ignored who will be paying for the flying. The photo itself is only £350 because of the flying. In your scheme who pays for the flying and what are the implications of getting your friends to pay an inflated photo price in order to cover the flying costs? (particualrly if they come along and take the photograph themselves) Do you know that link might help you?
whether a £350 gift given now, in return for an hour once qualified next year, constitutes commercial work
You could look at that link again? If your friend is going to give a 'gift' on the promise of an hours flying, then your friend becomes a fare paying passenger. A PPL cannot carry fare paying passengers, and as you have already been told, merely holding a CPL won't change that legality situation. Would the friend still get the promised hour if they didn't donate so generously?
If a gift is given, does that attract vat? No !
Guess I was right, your primary concern is VAT. I'd start with a better question, 'As a PPL or a CPL what can my son do (flying wise) safely and legally?' There must be a link somewhere that'd help you start to answer that? (sensing a pattern here?)
If a gift is given with the promise of a "free flight once I am ppl", does that constitute a gift or remuneration?
Would the person still be given the free flight had they not 'donated'? You answer your own question! Lets cut to the chase, you're asking if family and friends can pay your son to take them flying? In simple terms the answer is no. The link will tell you all about cost sharing trips. Your son could conduct those
If the £350 constitues a gift, its not cpl? If it constitutes remuneration it is cpl and should attract vat. It is therefore a commercial transaction entered into by a ppl? Is that allowed?
What are the friends paying £350 pounds for? Answer that and you'll answer the first bit. The second answer is hidden within the licence titles - Private v Commercial. Any clearer?
I know we cant charge for flying unless cpl, but can a ppl sell flights prior to obtaining the cpl as long as the flight is not conducted until after cpl?
As you know that bit, you have answered your own question. In addition you'll need more than simply the licence to conduct commercial flights. Do you know I have a feeling that a link that I might have mentioned before would help you understand the legal implications of a PPL advertising his services, even for cost sharing trips.
Dont get me wrong, I can see what you are trying to do. The bottom line though, is that there is no easy or cheap way for your son to qualify and get a flying job. It is expensive and there is no way of avoiding most of the cost. There are some legal ways that costs can be slightly lessened - cost sharing and asking to reclaim the VAT. Bear in mind the VAT angle has been abused by many over the years, and HMR+C will look at anything you suggest very closely. Zero to CPL will cost about £50K. The licence alone won't see your son working. You/he will also have to budget for an FI (instructor) rating (about an additional £25K) or an IR (instrument rating - about another £45K) for your son to stand ANY chance of finding some work.
You also have to remember that the CAA tend to take a dim view on rules being broken, and that as a PPL your son will have to sign a self fly hire agreement at the school he rents the aircraft from. This agreement will most likely specify quite clearly what your son can and cannot do whilst flying. The school too will take a dim view on your son conducting work illegally, that they pay the CAA a hefty fee to be allowed to conduct legally.