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Ax 2012 - Consume Net tcp service via Asp .Net application - Impersonation

I am consuming a few services of Ax 2012 R2 CU7 in an ASP .NET application (4.5), using windows authentication (intranet site)

When i run the application on IIS 8 Express, it all works fine. When i run it on my local IIS 7 server, it all fails. One of the ways to replicate what IIS 8 express does is by setting the Application pool identity to that of the Ax user / Logged in . It then works, so this proves that IIS 8 express works off the local users account.

Now when i make code changes to tell the client to impersonate / delegate, i get an obscure error:

The socket connection was aborted. This could be caused by an error processing your message or a receive timeout being exceeded by the remote host, or an underlying network resource issue. Local socket timeout was '00:00:59.9989999'.

However, if i tell the WCF client (in code) to use a specific Windows user, i.e. I set the windows username, password, domain then it works.

Question:

Are there setting in the config file in Ax to work around this?
I think this is a Double hop issue

Has anyone come across this and resolved this?

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