It is hard to believe this can’t be made to work.  As a troubleshooting experiment, does the Sky Q have optical out?  If so, try running it direct from the Sky box to the Playbar and see what you get.

The “info” button on your tv remote should tell you whether the program is being broadcast in DD. Watch out for confusing info: HD usually refers to the video rather than audio signal; DD 2.0 is only stereo. 

Thanks @John B I appreciate your response. I haven’t tried the Optical Out on the Sky Q box, but will give that a go. Is it true that DD5.1 is an audio output used by lots of channels?

If I do swap the optical cable from the TV to the Sky Q box, will that affect where the sound comes from for my PS4. Current setup is optical into the TV, Sky Q is plugged into the HDMI ARC port and PS4 is also in HDMI.

Thank you @nik9669a.

So when you say DD is only Stereo 2.0, my app is telling me that it’s Stereo 2.0. If I was to get DD5.1 output, would the app change to tell me that it’s DD5.1?

This is just a troubleshooting experiment to narrow down possibilities. You won't be able to play other sources like this.

If you play a DVD on the PS4 (I do mean a DVD, not a Bluray), if you have one, what do you get?

It shouldn't make a difference, but try the Sky HDMI in a non-HDMI-ARC port on the TV. Don't put anything in the HDMI-ARC. 

Sorry to confuse you. “DD 2.0” is only two channels - ie stereo. “DD” should be the same as “DD 5.1” But yes, when the Playbar is getting a 5.1 signal, the app will tell you “Audio in: Dolby Digital 5.1”. 
 

When you reconfigure your hardware, make sure to ask the system to generate the About my System page afresh - exit out of the results page and then back in to force the app to re-interrogate the system and give an updated report. 
 

DD2.0 and Stereo are in fact different encodings, though they both carry two channels.  

But in the context of the question/answer I didn’t want to over complicate things.