In simple terms you are correct they are a portable tax disc but here is the proviso
They should only be used in connection with genuine motor trade purposes for example demonstrating a car to a potential customer, road test of an untaxed vehicle etc.
I have worked for major groups who seem still to think that they are also a substitute MOT.
In respect of exemption from mot's motor insurance this is certainly not the case.
If your neighbour is using the plates for 'personal' use I would suggest that this is not legitimate use simply because they are not being used for the normal conduct of business.
Actually I have a question of my own in relation to trade plates, Often you see cars displaying in front and back windows, not at the extremities of the vehicle i.e front and rear bumper and clearly visible at a distance which the normal plate is..That I can understand would be an offence, But I am told that the vehicle for insurance purposes is only insured between the extremities of the plates,so for example a car that is displaying a plate in the windscreen and bangs the front end would not be insured ( third party issues excluded) one for the insurance guys