An interesting point of view. As far as I can see, an instructor can be remunerated 'within a Club environment', which I take to mean that both the instructor and the student need to be members of the same Club. I can't find anywhere that states the route by which that remuneration must occur.
Anyone else any insight, here ?

TOO

TOO,
It is not about how Instructors get paid (employed, self-employed, etc) it is about who provides the service.

"...get students/candidates to hire the aircraft from the Club, then enter into a separate, private arrangement with the instructor"

Perfectly acceptable, I would have thought, for Examiners and Instructors for continuation training but, for Initial/Renewal training, you cannot 'Have your cake and eat it'.
Either:
a) The Club is providing both airctraft and instruction and needs to be an RF/ATO
or
b) The Club is only renting aircraft to members and the Instructor is providing instruction, in which case they will need to be registered as an RF/ATO.

From what you have written it sounds as if a) above applies but, for solely Tax Avoidance reasons, you are charging as if b) applied. Be careful !

Level Attitude,

Yes, thank you, I will. Time for further thought

TOO

Blimey. Seems much ado about nothing. When I do a skill test I am paid direct by the student and it just goes in against my self employment return. Can't imagine ever making enough money out of it to charge vat!!!