Can somebody sleep in it, or can you build a garden annexe?

Only where it has been designed and approved for it. Any building containing sleeping accommodation needs full building regulations approval regardless of size, and the planning position has to be settled separately. Garden annexes with a bedroom, toilet and shower are entirely buildable, and are often what people mean when they talk about a granny annexe, but they are a construction project rather than a purchase. Say so at the start and we will take you down the correct route.