Unless I'm missing something (highly likely) there appears to be a lot of inconsistency revolving around the 'Smart transform' button.

Using charliescoffee example .xar with Smart Transform enabled or disabled and the Selection Bounds selected or unselected, I can flip the image without issue.
I've tried it in WDP 16.1 and my friends XDP 16.1.

The only time I can make it fail to flip is when I try to do so using the resizing handles, and even then I have to have both Smart Transform turned off AND the Selection Bounds selected.

It's been a confusing week for me, I might just have to do a factory reset on myself.