I'm always surprised that the UK HMRC hasn't clamped down heavily on contract pilots.
This must be a political expedient rather than one based purely on regulatory considerations.
Self-employed people must, together with other considerations, have the opportunity to substitute themselves and should be able to show that they do not have a fixed location to carry out there duties. Otherwise it could be construed that they are 'employed'.
How a pilot could 'substitute' their services (by allowing another, similarly qualified individual, to carry out their duties in their absence) is hard to imagine - and the left or right hand seat of a jet is a pretty 'fixed' as their base through which they carry out those duties.
This employment -v- self-employment arguments are ongoing in many industries - maybe the HMRC aren't really that bothered after all.
But it is a real concern and any decent contract for professional services will make it VERY clear that you are NOT an employee by expressly stating that it is not a contract of employment.
Maybe the airlines make that very clear too - the problem is that the manner in which the service is provided contradicts any terms and conditions stated to the contrary and the regulations of the HMRC.
I've stated in the past that one English pilot I met, who flew with an Irish carrier, openly stated that if the HMRC could track him down as a UK pilot, flying for an Irish carrier and based in Spain good look to them. They haven't so far, so lots of tax evaded there ... !!! lol