You might be able to get the WC moved under the stairs, but it will depend on height of ceiling (and therefore headroom under stairs). they've put the toilet directly below the upstairs one to make it easy for plumbing and to provide that back door entrance, "room" which isn't a bad idea, but does eat into the kitchen as you say.

if there's not enough headroom under the stairs then the only other option would be to move the toilet along so it backs onto the understairs area - it would protrude into the kitchen space to some extent but not as much as it is. this might create a bigger space in kitchen, but having a back door straight into kitchen isn't ideal either, so my advice would be to live in the house for a year and see if the current layout actually does work - might be that having a separate back entrance with WC and storage in it is more practical than a bigger kitchen.

Upstairs, you can probably knock through into that cupboard on the landing and incorporate that into bathroom to make it bigger? Unless it's got a hot water tank or boiler or something, in which case it's more work but not impossible.

I appreciate your input. I guess the question is whether we would value a dining area more over a small utility with a toilet.

The upstairs cupboard has an electric immersion heater. That could potentially be moved to the utility room downstairs (and changed to a system boiler) to create a bigger bathroom upstairs.