Thank you for your replies.
It's definitely an attention thing rather than a capability thing and after reading your replies, it's reminding me of when I've had to study something I thought was crap and boring and my brain disengaged. So it's probably hereditary, i.e. my fault!
It's always when she's busy doing something she seems to think is more important than listening to what I'm saying. Even if what she's doing is staring in to space.
Examples:
Dd jumping on my pillow, I say "you're jumping on my hair, please move away from my head", dd says (whilst still jumping) "eh?". I say it gently, strongly, quietly, loudly, until eventually I pick her up and move her and she sits down and cries.
Dd bends down to touch something on the ground, I ask "what are you doing", dd says nothing, I realise she's about to grab some discarded chewing gum on the pavement so say "that's dirty, don't touch it", dd says "what's this mummy?" and grabs it, dh and I both say "it's from someone's mouth, stop touching it", dd pokes it again and says "what's this mummy?" as if no-one has sais anything. I pick dd up and move her away from it, dd cries.