I'll try and answer a few questions.
Yes it required planning permission. But importantly (and something I didn't pick up) they applies for a change of use for the part of the extension between our houses (so not the bit out the back), so not an extension of such but a conversion of the garage into habitable accommodation.
Our houses were originally link detached, therefore as they shouldn't be touching our wall, or building on to it, there was no need for the usual party wall agreement. The one we received was to notify of changes to the part of our roof that is overhanging their property. The changes to our roof will make a valley gutter, therefore shielding the gap from water getting in and what not.
Our house is actually higher than theirs, the structural engineers drawings we were supplied with show a DPC taken 150mm above adjacent level DPC - but I'm assuming this is their side only.
There are actually no rules on distance between extensions, as far as I can see anyway! They are taking it right up to the boundary line.
I think the gap we left was a suggestion from our builder to try and guard against noise- we don't hear our neighbours on the other side.
I am going to call the neighbours today, and say that the wall is significantly closer than we expected, and therefore would they consider adding soundproofing their side (beneficial to both of us).
We will also be taking dated pictures of our walls as someone else pointed out the extension being this close would need support from our foundations and may have also disturbed them, so if there is any cracks or anything we want it noted they have appeared AFTER the work was done.
The link to a semi is a bit of a red herring i think, seeing as we were attached anyway, it's just the attached part was a garage.
On closer inspection, once the builders left last night, it isn't touching, just exceedingly close. So i don't think we can get them to rebuild, I think requesting the soundproofing is the way to go, and documenting the existing quality (not the right word but can't think of it) of our walls internally at least, as the wall has gone all the way up now so we can't see the external side.