I am confused if I should apply for Planning permission or ask for change of use.

Grumpy_chap

Archishard said:

Was built already when I bought it and it came with a indemnity policy, no PP. I can only assume is a PD.

How was a bathroom and kitchenette built without building regs? Was this possible?

Archishard said:

Grumpy_chap said:

Does the garden room meet building regulations for habitation?

I can assume it does, dimensions and plumbing is all ok.

That is a lot of "assuming" going on.

What was the indemnity policy for?  
Who requested the indemnity policy?
A typical indemnity policy would be to cover the purchaser (you) in the event that the Local Authority take action to enforce planning rules for something that has been constructed without the appropriate permissions.
The indemnity policy probably has a clause precluding the scenario whereby you report your own outbuilding to the Local Authority.

I think you might be best not to do anything to bring this to the attention of the Local Authority.

ThisIsWeird

As Grumpy says, there is every chance your indemnity policy will be effectively voided should you report the building to Planning and/or Building Control, say in order to apply for retrospective. You could perhaps ask your conveyancing solicitor to confirm that point? Or, just read the policy - I understand that such a clause will be pretty prominent.
IndPols protect you against unprompted action taken by Planning/BC against you - say someone else like a neighbour or visitor reported their suspicions of its full use to the LA, or they noticed it when visiting for a different reason. My understanding in such an event is that the policy will kick in and cover you against the costs of meeting the demands of the action taken against you; it won't protect you against the actual action. So, if - for example - the LA insists you remove the bathroom or kitchen as the building doesn't conform to P or BC, and they have no intention in allowing either, or is breaching Planning (and I'm laying good odds on this being the outcome...), then the policy may first cover your appeal costs (I presume if they judge a reasonable chance of success), and then - when you lose - the lowest cost of complying with the LA's demands, which will likely be by having these sections removed. It won't 'stop' the LA's action.
NB: that is my understanding.
I see next-to-zero chance that the LA 'approves' your building's habitable status; it would presumably have to fully conform to Build Regs (no idea which standard), and this would surely require extensive investigation to confirm current, and then most likely additional work to upgrade. Coupled with Planning approval. What are the chances?! But I don't know.
So, I reckon your best best is to carry on as you are, and hope the IndPol kicks in if the LA finds out about it.
Tell them, and policy likely voids.

My understanding only.

Doozergirl

Can we go back to the beginning here? 

You want to classify it as habitable.  In what way?  You want to move a relative in and have it as an annexe?  You want to get planning permission for a separate dwelling?  You want to AirBnB it? 

How long has the building existed/been in its current form?  

Do you know how it is built? Insulation levels?  Method of drainage?