There has now been an update to the design library. I’m guessing that the issue posted above was a bug.
If you update the design library to the latest version this issue no longer occurs.
I have now removed all fitsSystemWindows=”true” except for the ImageView (as that needs to display under the status bar).
I have also removed the minus padding from the Toolbar.
This is my theme for 21+
<style name="AppTheme" parent="Theme.AppCompat.Light.NoActionBar">
<item name="android:windowTranslucentStatus">true</item>
<item name="android:windowActionBarOverlay">true</item>
<item name="android:windowContentOverlay">@null</item>
<item name="android:textColorPrimary">@android:color/white</item>
</style>
It all works as expected now