Well Derhh! me. Having wasted hours on this, phoning apple support, Toyota and Bluetooth device manufacturers, jabbering about the arcane differences between old/new versions of this and that ....Its now working perfectly !!!
Solution (well for me anyway) Under the Prius' telephones tab, it was showing Iphone (my old Iphone 5 I assume) When trying to set up the new IP8+ it was getting confused coz it also tries to register the new phone as Iphone as well. The solution was simply to delete all past phones from the Prius (as suggested elsewhere but not so easy to do) then go to the Bluetooth setting and hit Register. Bingo
Good luck to others.
AlanH