I'm intrigued that this is still running - what I thought was a stupid question (answer obvious, in a single pilot plane the PIC has to be sat in the front) is clearly not quite as simple/clear cut.

In the end we did the 'obvious' thing, just got everyone fully insured. Ferry completed yesterday!

I was involved in an accident in March 2013 (two -seater powered glider). The children of the PIC, who died in the crash, tried to give me a bit of the responsibility, but at the court proceedings they lost as the PIC is the person in the left hand seat. There was no argument about that!! I'm still suffering from that accident (I can't walk)!! I was once a flight instrutor but that was no longer good.

Actually, it's not missing, just well hidden

There’s a lot here that we don’t know:
Where you giving instruction or was this a joyride.
Were you current in make and model?
Were you even familiar with make and model?
Did you hold a medical on that day?
Long story short did you qualify to be PIC that day or not?

There’s a lot there that would have come up during a judicial inquiry.
In the original question assume we have three people that are similarly experienced and everybody is current and otherwise qualified to be PIC, can the person in the backseat be the PIC? Yes they can.

As far as rental aircraft, in whose name is the aircraft signed out that flight?
That will always be the one responsible in the eyes of the insurance company.

Just because you can do something doesn't mean you should

Personally in any light aircraft I am in I will have a set of controls and I will be PIC. This will be confirmed before I get in the aircraft.

Just how many people were on board this two seater? Seems PIC, you, children (plural), making at least four. Been there, as a young teenager a local instructor took me for a night flight in a two seater with his daughter sitting on my lap, included a few loops over a well lit city.

Try two. The text says it was PIC who sadly died not the children.

Thanks Jim, not the way I interpreted his sentence, back to school.

In the UK the situation is clearly laid out in the Air Navigation Order 2016 Article 70, copied below. The relevant section is 3 which implies that you can be the PIC and not at the controls as long as the flight is not a public transport passenger flight. Different for helicopters (section 4)

Pilot to remain at controls and be secured in seat
70.—(1) During flight, the pilot in command must—
(a) keep any safety belt fastened while at the pilot’s station; and
(b) remain at the controls of the aircraft at all times except if another pilot is taking the
controls.
(2) If the aircraft is required by or under this Order to carry two pilots, the pilot in command
must cause both pilots to remain at the controls during take-off and landing.
(3) If the aircraft carries two or more pilots (whether or not it is required to do so) and is flying
on a flight for the purpose of the public transport of passengers, the pilot in command must remain
at the controls during take-off and landing.
(4) An operator must not permit a helicopter rotor to be turned under power for the purpose of
making a flight unless there is a person at the controls entitled in accordance with article 137 to act
as pilot in command of the helicopter. (a)