The right of the OP to lawfully build the extension is precedent. He does nothing wrong by building the extension
Effectively the OP would not be blocking the flue, but rather the neighbour is causing his own flue to be in a position where it is blocked - that is why he must sort out his own flue position.
The neighbour attains no rights to place, or cause his flue to be placed in a position where is will not function or will become dangerous (or a nuisance)
They cannot Lawfully build an extension, if it compromises the safety of the neighbours boiler, without committing an offense.
They can talk to the neighbour and ask him to move it, or go through the Courts if they refuse.
There may also be the small problem that the flue was agreeable to both parties when it was installed.
I think after 10 years, the Courts would favour the boiler.