2 policies that affected the registry. A colleague's Windows 8.1 laptop did not have these policies and was able to link to the .ics file.
Using regedit found these:
..Software,Policy,Office,16.0,Outlook,DisablePST (REG_DWORD), value 1 ..Software,Policy,Office,16.0,Outlook,Options,webcal (REG_DWORD),Disable value 1
To prove this was the problem I added 2 entries to the registry
..Software,Microsoft,Office,16.0,Outlook,DisablePST (REG_DWORD), value 0 ..Software,Microsoft,Office,16.0,Outlook,Options,webcal (REG_DWORD),Disable value 0
I was then able to add an internet calendar as expected.
This added a pst file to "C:\Users\xxx\AppData\Local\Microsoft\Outlook"