Remove create MR button from issues when MRs are disabled

app/views/projects/issues/_new_branch.html.haml

+- can_create_merge_request = can?(current_user, :create_merge_request, @project)
+- data_action = can_create_merge_request ? 'create-mr' : 'create-branch'
+- value = can_create_merge_request ? 'Create a merge request' : 'Create a branch'
+
 - if can?(current_user, :push_code, @project)
   .create-mr-dropdown-wrap{ data: { can_create_path: can_create_branch_project_issue_path(@project, @issue), create_mr_path: create_merge_request_project_issue_path(@project, @issue), create_branch_path: project_branches_path(@project, branch_name: @issue.to_branch_name, issue_iid: @issue.iid) } }
     .btn-group.unavailable
@@ -6,10 +10,11 @@
         %span.text
           Checking branch availability…
     .btn-group.available.hide
-      %input.btn.js-create-merge-request.btn-inverted.btn-success{ type: 'button', value: 'Create a merge request', data: { action: 'create-mr' } }
+      %input.btn.js-create-merge-request.btn-inverted.btn-success{ type: 'button', value: value, data: { action: data_action } }
       %button.btn.btn-inverted.dropdown-toggle.btn-inverted.btn-success.js-dropdown-toggle{ type: 'button', data: { 'dropdown-trigger' => '#create-merge-request-dropdown' } }
         = icon('caret-down')
       %ul#create-merge-request-dropdown.dropdown-menu.dropdown-menu-align-right{ data: { dropdown: true } }
+        - if can_create_merge_request
           %li.droplab-item-selected{ role: 'button', data: { value: 'create-mr', 'text' => 'Create a merge request' } }
             .menu-item
               .icon-container
@@ -19,7 +24,7 @@
                 %span
                   Creates a merge request named after this issue, with source branch created from '#{@project.default_branch}'.
           %li.divider.droplab-item-ignore
-        %li{ role: 'button', data: {  value: 'create-branch', 'text' => 'Create a branch' } }
+        %li{ class: [!can_create_merge_request && 'droplab-item-selected'], role: 'button', data: {  value: 'create-branch', 'text' => 'Create a branch' } }
           .menu-item
             .icon-container
               = icon('check')

changelogs/unreleased/38247-hide-create-mr-button-in-issue-show.yml

+---
+title: Remove create MR button from issues when MRs are disabled
+merge_request: 15071
+author: George Andrinopoulos
+type: fixed

spec/features/issues/create_branch_merge_request_spec.rb

@@ -64,6 +64,19 @@ feature 'Create Branch/Merge Request Dropdown on issue page', :feature, :js do
       end
     end
 
+    context 'when merge requests are disabled' do
+      before do
+        project.project_feature.update(merge_requests_access_level: 0)
+
+        visit project_issue_path(project, issue)
+      end
+
+      it 'shows only create branch button' do
+        expect(page).not_to have_button('Create a merge request')
+        expect(page).to have_button('Create a branch')
+      end
+    end
+
     context 'when issue is confidential' do
       it 'disables the create branch button' do
         issue = create(:issue, :confidential, project: project)