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Vesalius
The original location of the legal boundary will be determined by the conveyance which originally divided your land from the adjoining land. In a lot of cases though, espcially with older houses, that original conveyance will no longer be available.
The Land Registry plans are useless for determining boundaries, thanks to the general boundaries rule. Basically, don't even bother trying to use Land Registry plans to establish where the boundary is.
If the fence dividing the properties has been in the same location for a long period of time, then it will have become the legal boundary through adverse possession or on the basis of an implied boundary agreement. If the fence has been there for a long time, and everyone's treated it as the boundary, then it is the boundary.
If your neighbour wants to build a wall straddling the boundary line, then they have to serve a notice under s. 1(2) of the Party Wal etc Act 1996 (and yes, the real title of the Act includes the word 'etc'). You have two options:
If they want to build the wall so the outside face (from their property) is on the boundary line (so in line with the fence) they have to serve a section 1(5) notice. However, they have to compensate you (under section 1(7)) for any loss or damage you suffer as a result.
Personally, I'd insist on it being done properly and having proper 1996 Act notices being served, unless they want to build the new shed entirely on their land. It's a bit of a PITA, and it can get expensive for them, but it's not as much of a PITA and nowhere near as expensive as a full-blown boundary dispute. And I've known full-blown boundary disputes kick off over far less.
Salutary tale: I was involved not that long ago in a boundary dispute case, where the combined legal costs ended up being over quarter of a million, because my client resurfaced a shared driveway. He won, but it still ended up costing him £50k and 2 years of aggro.