Under eu-ops its Aerial work even if you don't get Paid.
It actually changed with JAR ops years ago and if you were under a UK AOC you could do it but if under a JAR-OPS AOC you couldn't. Then everyone transferred and it got stopped.
As soon as you are subject to a FTL scheme you have to declare all of it I am afraid. And no working on mandatory days off.
why are you devaluing instruction and undermining other instructors?
More than likely because he enjoys it. Also as well if your getting paid PAYE if you then have other sources of income you have to do a tax return and more than likely hand over 40% of the cash anyway. Realistically if they are a pro full time pilot they won't be doing many hours a year so the hassle of charging isn't worth it.
Also as well some of the old school pilots think that if they don't charge then they don't have to tell the company about it for FTL's as per the old UK CAA rules on the subject. Which hasn't been the case for some 8 years since the last UK AOC got transferred to JAR-OPS.