Sharepoint: Couldnt resolve user......

I have a fresh Sharepoint install (E5 Developer License)........both the organisation settings within the admin 365 portal and the site settings within the sharepoint portal allow sharing to anyone. However, I cannot share a file with anyone external I just receive the following error...."Couldnt resolve user <external address>". Pretty frustrating as this seems so simple but cannot for the life of me determine whats going on.

Any help would be appreciated