After creating a SharePoint Communication site I wanted to share it with an external user. When attempting to share the site I got the error

Your organization’s policies don’t allow you to share with these users. Go to External Sharing in the Office 365 admin center to enable it.

But I had sharing enabled via the admin center. The error message is very deceiving. After a lot of googling I discovered that Communication sites are different to plain old SharePoint Sites. The solution was to use SharePoint Online Management shell and enable sharing.

The commands are as follows:

Connect-SPOService -Url https://<yourUrl>

$siteurl=”<communication Site Url>”

set-sposite -identity $siteurl -sharingcapability ExternalUserAndGuestSharing

And Bingo, Sharing is now enabled.