
I think it will be a problem if your contract said - do the health tests and then contact me, if you said it depended on showing results, being a good example of the breed, if you as a breeder wanted it to be bred, and then health test and if ok then you'd lift. If you've only specified health tests then you're likely to find that the KC will lift even without your consent as that's what you've said. If you sold the pup as a 'pet' and said 'no breeding, full stop' then they wouldn't - as long as it was clear and the owner was in no doubt...
as for their expenses and thinking they're using it as a money making exercise and that the 'taxman' would be interested - they can only make money if they're back yard breeders, I worked out that with my dogs, showing (agility), buying and keeping dogs that I'd have to 'earn' at least £10k per year from my dogs before the tax man would start to take an interest and I hadn't included all the relevant expenses, I just stopped looking at it was too frightening! This is taking into account keeping the bitch for 14 years etc etc. As I had a litter 2 years ago, I'm nowhere (nor ever likely to be) close to that figure!
With my latest litter - buying food - sacks of puppy/whelp kibble, fresh meat/fish/eggs/carrots/apples etc costs a lot more than you are saying.... don't forget wormer, additionally I had a £200+ vet bill, in the past I've spent £1k+ on a pup only to lose her at 4months... I've also bought pups new toys, ball pool, various textures etc... I'll provide sacks of food, toy etc
Yes people do make money, but as others have said, only by cutting corners and not doing the best for mum and pups :-(
I have heard of people selling pups and charging a fee to lift endorsements, even that they then expect a pup (or cash) from each litter... terrible practices... I've lifted endorsements from a few of the dogs I've bred, but why would I charge for this? Not even crossed my mind...