Okay I've got some more information, as I've got it to work by turning off FBTC.
Now the interesting thing is I can understand why the local connection was working as opposed to N/W connection, as FBTC is used to reduce B/W consumption on trunks by doing EPD.
However why is it that our tester which is using ITU-0.191 ATM cells, therefore sending AAL5 frames including SOF and EOF frames but the UBR PVC is discarding all cells on the ingress VC queue. We use this tester to test VBR and CBR PVC's, VBR also uses FBTC and we don't see the same issues with Oflw CLP 0/1 discards.
Finally configured the tester as VBR and also made no difference... The wired thing is I brought up the customer with FBTC enabled and all is fine, so why didn't it work with the tester?