OK, so the proposed location is close to your existing dwelling, so the rule about no shed greater than 10 square metres in area further than 20m of the dwelling is not an issue.
You just need to check the rule about ridge height from the shed spec. Being 3.5m wide, it is very likely under 4m, but greater than 2.5m. So the issue would be the distance to the neighbour's boundary.
Even if greater than what height is permitted, it looks well screened and if neighbour is OK about it, no-one will perhaps question it.
The worst that could happen is you are asked to remove it or apply for retrospective consent.