I found out what the problem is - which I believe must be a bug in Xcode in how it creates the extension target.
If different types of extension are created (for example an action extension or a call extension) then if you look at the Code Signing Entitlements section within Build Settings its empty.
However, if a background asset download extension is created then it's not empty. If its changed to be empty then the problems described above go away.
Topic:
App & System Services
SubTopic:
General
Tags: