FIXED. Found the issue, I have ithemes security (better wp security) installed, and have set under ‘System Tweaks’ the setting: Filter Suspicious Query Strings in the URL, to enabled. When I disable this, all works again!!
It seems it only doesnt work when you query a category, and then query a taxonomy term at the same time, if I try it without querying a category, the the taxonomy filter works fine. I do need to be able to query both.