VSCode Extension: Permissions not persisting

Environment

• Claude Code VSCode Extension
• macOS

Issue

Permissions saved in .claude/settings.local.json are not being respected. The extension repeatedly asks for tool permissions that have already been allowed.

Current settings.local.json

{
  "permissions": {
    "allow": [
      "Bash(find:*)",
      "mcp__enhanced-cot__chainofthought",
      "mcp__MCP_DOCKER__fetch",
      "mcp__MCP_DOCKER__get-library-docs"
    ],
    "deny": [],
    "ask": []
  }
}

Expected behavior

Tools in the allow array should not prompt for permission.

Actual behavior

Extension prompts for permission repeatedly, same as if no settings existed.

Notes

• This worked correctly in CLI
• Global ~/.claude/settings.json exists and has different schema (no permissions block)
• Project-level .claude/settings.local.json has permissions but they're ignored