A terrorist who went on a knife rampage in a busy shopping street was lawfully killed when he was shot dead by undercover surveillance officers, a jury has found.

Sudesh Amman, 20, from Queensbury, north London, had been released from Belmarsh jail 10 days earlier after serving half of a 40-month sentence for obtaining and distributing material for terrorist purposes.

The inquest jury at the Royal Courts of Justice said they felt an opportunity was missed to return Amman to prison after he bought items used in his fake suicide in the days before the attack.

He had laughed as he was sent to prison after being found with a combat knife and a jihadi flag at his home, and was found to be encouraging his girlfriend to kill her parents.

In prison, he boasted of a “strong desire to go to the afterlife” and openly shared his wish to kill the Queen, become a suicide bomber, and join Islamic State (IS).

He said he wished he had been involved in the killing of Fusilier Lee Rigby, who was executed with a knife in front of Woolwich barracks in May 2013.

Prison officers searched his cell just weeks before his release and found a pledge of allegiance to Abu Bakr al Baghdadi, the leader of IS, written out in Arabic.

A senior officer wrote to the prison governor of Belmarsh jail, asking if he could keep Amman in jail longer, but it was not possible.

Police and MI5 teams believed that Amman was “one of the most dangerous individuals” that they had investigated and it was a question of “when, not if” he would launch an attack.

Nevertheless, on 2 February last year, he grabbed a carving knife from a shop and stabbed two passers-by, one of them seriously, during his attack in south London.

He was shot dead by armed surveillance officers in front of Boots in Streatham High Road, 62 seconds after the attack began, when he turned and ran at the officers.

The inquest heard about three opportunities to stop the attack in the 10 days between his release and him carrying it out.

Rajiv Menon QC, for Amman’s family, questioned an anonymous senior Scotland Yard officer called HA6, who said he had a “well thought-out plan to manage the risk”.

Mr Menon said the plan was a “miserable failure”.

Amman was under surveillance on Friday 31 January when he bought bottles of Iron Bru, Bacofoil and brown parcel tape in Poundland, which they rightly believed he might use to make a fake suicide vest.

He also went into the same Low Price Store in Streatham High Road, where he later grabbed the knife, and looked at a section of the shop with sharp knives before claiming he did not have any money.

MI5 and the police convened an emergency joint operations teams meeting that evening to decide what to do, but decided to leave him out on the streets.

They chose not to search his room in the probation hostel in the next two days, where they might have found his fake suicide vest, allowing them to arrest him and send him back to jail.

The probation service also decided that his suspicious behaviour was not enough to justify recalling him to prison for another 20 months to complete his sentence.

A third opportunity was missed when Amman, who was wearing a bulky coat, began acting oddly as he made his way towards Streatham High Road on the afternoon of Sunday 2 February, walking slowly, doubling back on himself.

The jury had been asked to reach conclusions on whether the probation service or police could have stopped the attack taking place.

They were asked whether the probation service should have taken steps on 31 January or 1 February to have Amman recalled to prison as a result of the purchases he had made, which “raised serious suspicion that he was intending to make a hoax suicide belt”.

They were also asked whether the police investigation team ought to have asked to have Amman’s probation hostel room searched following the purchases.

A last question asked whether Amman should have been stopped and searched by armed police officers on 2 February, between him leaving the hostel at 1.22pm and running out of the Low Price Store with a knife at 1.57pm.

Amman was not treated for his injuries because of the possible suicide vest, but he had suffered two significant gunshot injuries and they were not survivable, the jury was told.

They were directed to return a finding of lawful killing after one of the undercover officers, known as BX87, broke down giving evidence, saying he thought Amman was going to kill him.

Questions are now likely to be asked about whether Amman could have been separated from more serious terrorist offenders while in prison.

He was moved into the high security unit in Belmarsh jail, where he was seen “deep in conversation” with Ahmed Hassan, who tried to blow up a Tube train at Parsons Green in September 2017.

Other reports suggested he was mixing with terrorist prisoners including Hashem Abedi, the brother of the Manchester Arena bomber, who helped build the bomb that killed 22 people.

In a letter to his mother on 25 July, two months after his arrest, Amman wrote: “Why do I keep smiling? I never used to smile. Wallahi [I swear] it makes me tear up when I go to jummah prayers with all the brothers. It is such a beautiful experience, it’s a blessing, you don’t understand. I have never felt this amount of happiness in any mosque, hugging and salaaming [greeting] the brothers.”

The case echoes that of Usman Khan, who stabbed to death two Cambridge University graduates at a prison rehabilitation conference at Fishmongers’ Hall two months before the Streatham Attack.

Khan had failed to reform while in prison for planning to set up a terrorist training camp and had also mixed with serious offenders in jail.

He launched his attack 11 months after his release, after police failed to search his flat when suspicions were raised about his behaviour.

He was also wearing a fake suicide belt and was shot dead by police.

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