Running a quick test on my file, I can see the only way the Annual Leave Taken is not deducted from the employee's Leave Balance is if the Pay Run is not finalised with the below steps:
Please check that this is the case, and you should see the balance adjust.
I have a similar issue.
When I use the action and try to adjust the leave with a negative I get an error that says "negative figures are not allowed."
When I chose "annual leaven" and enter the hours taken - their balance does not go down.
How do reduce their leave hours?
Ensure you've selected Adjust Leave in the actions menu to be able to enter negative hours. The negative figures error message occurs if you try to enter negative hours after selecting Take Leave.
Once you've entered the negative hours, save the changes and select Leave Balances next to the Actions button. It should show under the Annual Leave balances that the pay run is "including -xx hours from this Pay Run." This means once the pay run is finalised, the leave adjustments will be applied. You must finalise the pay run before seeing these changes. Any Draft Pay Slips you may run to check the balance before finalising won't show these changes.