Customer has an open unpaid invoice and an open unallocated credit note.
When opening the adjustment note and selecting Use refund to > Apply to tax invoice receive the message "This customer has no open invoices" .. (which is incorrect)
Worked it out.
The credit was raised against the customer.
The invoice was for customer job.
Even though the same customer, unless the credit note is raised against the same job, Reckon will not allow you to apply the credit to the invoice.
To resolve: credit note had to be updated to reflect the same job. Then you can apply.. Hmmmm