Income taxes

12 Months Ended

Dec. 31, 2023

Income taxes [Abstract]

Income taxes

12. Income taxes

Net loss before income taxes is as follows (in thousands):

	2023			2022			2021
United States	$	11,612		$	7,509		$	2,566
United Kingdom		(76,866	)		(47,566	)		(182,816	)
Other worldwide		4,364			(826	)		371
Net loss before income taxes	$	(60,890	)	$	(40,883	)	$	(179,879	)

The components of income tax credit are as follows (in thousands):

	2023			2022			2021
Current:
United Kingdom	$	—		$	(12,420	)	$	(54	)
United States - Federal and State		215			(968	)		(146	)
Other worldwide		(455	)		—			(43	)
Total current tax	$	(240	)	$	(13,388	)		(243	)
Deferred:
United Kingdom	$	—		$	—		$	—
United States - Federal and State		5,873			1,694			93
Other worldwide		(30	)		34			—
Total deferred tax	$	5,843		$	1,728		$	93
Total income tax credit (expense)	$	5,603		$	(11,660	)	$	(150	)

The tax effects of temporary differences and carryforwards that give rise to deferred tax assets and liabilities were as follows (in thousands):

	2023			2022
Deferred tax assets
Net losses	$	74,916		$	73,059
Fixed assets		4,286			5,241
R&D credits		5,745			6,166
Corporate interest restriction		—			731
Stock based compensation		9,795			6,329
Other deferred tax assets		511			875
Total deferred tax assets	$	95,253		$	92,401
Deferred tax liabilities
Other deferred tax liabilities		(1,154	)		(844	)
Total deferred tax liabilities	$	(1,154	)	$	(844	)
Valuation allowance		(83,126	)		(86,436	)
Net deferred tax assets	$	10,973		$	5,121

The movements in the deferred tax asset valuation allowances are as follows (in thousands):

	2023			2022
Valuation allowance as of January 1,	$	(86,436	)	$	(87,867	)
Decrease (Increase) in valuation allowance through net loss		7,573			(7,680	)
Foreign currency translation adjustments		(4,263	)		9,111
Valuation allowance as of December 31,	$	(83,126	)	$	(86,436	)

Reconciliation of the U.K. statutory income tax rate, the income tax rate of the country of domicile of the Company, to the Company’s effective income tax rate is as follows (in percentages):

	2023		2022		2021
U.K. statutory income tax rate		23.5%		19.0%		19.0%
Non-deductible expenses		(1.1)%		(20.7)%		(9.8)%
Above the line credit not taxable		(2.9)%		7.3%		1.4%
Additional deduction for R&D expenditure		—		50.6%		9.4%
Surrender of tax losses for R&D tax credit refund		—		(9.6)%		(9.4)%
R&D expenditure credits		5.3%		(28.0)%		0.8%
Share based payments		(3.0)%		—		—
State taxes		0.1%		1.3%		—
Foreign rate differential		1.3%		(0.5)%		(0.1)%
Prior period adjustments		0.5%		0.4%		(0.3)%
Leases		—		(0.4)%		(0.4)%
Change in valuation allowances		(14.5)%		(47.9)%		(10.7)%
Effective income tax rate		9.2%		(28.5)%		(0.1)%

On May 24, 2021, the U.K. 2021 Finance Bill was substantively enacted and subsequently received Royal Assent on June 10, 2021. Under this bill, the rate of U.K. corporation tax has increased to 25% in 2023, with lower rates and tapered relief applied to companies with profits below $2.5 million.

As of December 31, 2023, the Company’s net operating loss carryforwards in the United Kingdom totaled $286 million.

As of December 31, 2023, the Company has U.S. R&D credits totaling $5.7 million, of which, $5.3 million relates to federal tax credits.

U.K. tax credit carryforwards can be carried forward indefinitely to be offset against future tax liabilities of the company. Non-U.K. net operating loss carryforwards can be carried forward indefinitely. U.S. tax credit carryforwards can be carried forward for 20 years to be offset against future tax liabilities, subject to a minimum tax payment of 25% of the tax charge.

A valuation allowance is established when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. The majority of the Company’s deferred tax assets relate to net operating loss and R&D carryforwards that can only be realized if the Company is profitable in future periods. Accordingly, the Company has provided a valuation allowance against a substantial amount of the net deferred tax assets due to uncertainties as to their ultimate realization.

The Company operates in multiple jurisdictions with complex tax and regulatory environment and our tax returns are periodically audited or subjected to review by tax authorities. The following table summarizes tax years that remain subject to examination by tax jurisdiction as of December 31, 2023:

Jurisdiction	Open Tax Years Based on Originally Filed Returns
United Kingdom	2021-2022
United States	2020-2022

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2023 and 2022, the Company has not recorded any provision for uncertain tax positions.