Having revisited some answers on here for similar questions I was able to find the solution. This can be seen at Microsoft Office Excel cannot access the file 'c:\inetpub\wwwroot\Timesheet\App_Data\Template.xlsx'
I created the directory C:\Windows\SysWOW64\config\systemprofile\Desktop
on the server and it miraculously now works. I had looked at this yesterday and thought the directory already existed so didn't implement this solution. But having a second look at it today shows the directory didn't exist and creating it fixed it.
Now the question is, why does this work?! But that is possibly another question.