Yes, built-up = code 3.
The registration paper and license disc will say code 3. However, an engine change (the engine number is simply changed on the registration paper) or modifications to the car doesn't make a car code 3.
For a vehicle to become code 3 it had to have been unregistered at some point, either because the owner decided to do so him/herself, the vehicle was written off or the vehicle was stolen. Then at the point that you re-register the vehicle it becomes code 3 (to re-register a certificate of road worthiness is required). Once code 3 the vehicle will have virtually no resell value and insurers aren't legally obligated to insure the vehicle ( an insurer cannot refuse to insure you for a normal vehicle for example).
A seller is legally required to tell you the vehicle is code 3.
The reason for the low resell value is basically that passing the road worthiness test isn't the most difficult thing to accomplish and no sane person would un-register their vehicle themselves, therefore in 99% of the cases the car was either written off (IE. heavily damaged) or driven by criminals (ever heard the expression drive it like you stole it? Well it's because stolen vehicles get trashed). I've seen a code 3 vehicle that actually got it's road worthiness but the chassis is bent beyond repair (the car fell off of a train on the way from the factory apparently). The cars wind screen (front) cracks every few months and steering is totally messed up as well as road handling. That is the type of vehicle that can pass the test hence the reason that any sane dealer won't buy a code 3 to resell and that insurers will ask huge premiums to insure.
The only upside is some of these vehicles are properly fixed and can be picked up for a very low price.