We lived in a static in our back garden whilst renovating. for what was supposed to be 6m and ended up being 18m. Like yours, our council were very vague on whether we were allowed to do this, whether we needed a certificate of lawfulness etc etc.
We ended up taking the view that local government moved so slowly (ok, this was when we were on the 6m timescales!) that by the time someone complained, by the time the Council did anything and wrote a letter, we then (faffed) and replied to said letter - we were going to be coming to the end of the build anyway and could procrastinate some more to get us through to the end.
As it happened, even though our neighbours weren't amused as they were trying to sell their place at the same time and a static in the back wasn't quite the image they were trying to convey, even they could see that if they made us move out of it, and paid more money in rent, then the build would have lasted even longer.
I'd agree with the previous poster though, we had an insulated and double glazed one, and it was COLD. You will run out of gas once, and then be paranoid about it, there is no space, drying clothes which don't go in the tumble dryer is a nightmare, and you will never be warm. We went through one winter in ours, (with 2 kids and a cat), it was not something we wanted to do again, our greatest achievement was coming out of that period still married with everyone alive and well, just living in such a small inconvenient cold place puts a lot of strain on relationships.
It did however save us a fortune compared to renting locally and meant that we were on site 24/7, which did help with the builders.