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Income Taxes
 12 Months Ended
Mar. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The income (loss) before income taxes and the related tax expense are as follows (in thousands):
Year Ended March 31,
202220212020
(Loss) income before income taxes:
United States$45,446 $(40,663)$(29,509)
Switzerland(237,903)(201,673)(239,666)
Bermuda(8,415)(12,310)(19,054)
Other(1)
(61)(152)1 
Total loss before income taxes$(200,933)$(254,798)$(288,228)
Current taxes:
United States$5,048 $335 $758 
Switzerland— — — 
Bermuda— 1 — 
Other(1)
— — 3 
Total current tax expense5,048 336 761 
Deferred taxes:
United States— — — 
Switzerland— — — 
Bermuda— — — 
Other(1)
— — — 
Total deferred tax expense— — — 
Total income tax expense$5,048 $336 $761 
(1) Primarily Ireland and United Kingdom activity.
A reconciliation of income tax expense computed at the Bermuda statutory rate to income tax expense reflected in the consolidated statements of operations is as follows (dollars in thousands):
Year Ended March 31,
202220212020
Income tax expense at Bermuda statutory rate$— — %$— — %$— — %
Foreign rate differential(1)
(25,720)12.80 %(37,622)14.77 %(40,056)13.90 %
Impact of changes in enacted income tax rates— — %— — %(27,150)9.42 %
Currency remeasurement effects on Swiss deferred tax assets(3,045)1.52 %(13,742)5.39 %— — %
Officer’s non-deductible share-based compensation— — %9,590 (3.76)%— — %
R&D tax credits(2,819)1.40 %(3,771)1.48 %(1,208)0.42 %
Share-based compensation deferral adjustment— — %(4,364)1.71 %4,089 (1.42)%
Valuation allowance36,331 (18.08)%50,333 (19.75)%65,193 (22.62)%
Other301 (0.15)%(88)0.03 %(107)0.04 %
Total income tax expense$5,048 (2.51)%$336 (0.13)%$761 (0.26)%
(1) Primarily related to current tax on United States operations including permanent differences as well as operations in Switzerland and the United Kingdom at rates different than the Bermuda rate.
The Company’s effective tax rate for the years ended March 31, 2022, 2021, and 2020 was (2.51)%, (0.13)%, and (0.26)%, respectively, and is driven by the Company’s jurisdictional earnings by location and a valuation allowance that eliminates the Company’s global net deferred tax assets.
Deferred taxes reflect the tax effects of the differences between the amounts recorded as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax purposes. Significant components of the deferred tax assets and liabilities as of March 31, 2022 and 2021 are as follows (in thousands):
March 31,
20222021
Deferred tax assets:
Research tax credits$7,345 $9,967 
Net operating losses135,916 119,701 
Share-based compensation11,418 12,649 
Intangibles79,231 58,830 
Lease liability2,009 2,317 
Other10,536 7,080 
Subtotal246,455 210,544 
Valuation allowance (244,188)(207,858)
Deferred tax assets, net of valuation allowance2,267 2,686 
Deferred tax liabilities:
Depreciation(526)(651)
Right-of-use assets(1,741)(2,035)
Net deferred tax assets$— $— 

The Company assesses the realizability of the deferred tax assets at each balance sheet date based on available positive and negative evidence in order to determine the amount which is more likely than not to be realized and records a valuation allowance as necessary. Due to the Company’s cumulative loss position which provides significant negative evidence, which is difficult to overcome, the Company has recorded a valuation allowance of $244.2 million and $207.9 million as of March 31, 2022 and 2021, respectively, representing the portion of the deferred tax asset that is not more likely than not to be realized. During the year ended March 31, 2022, the total change in the valuation allowance was $36.3 million, which was primarily related to certain tax attributes and intangibles. The amount of the deferred tax asset considered realizable, could be adjusted for future factors that would impact the assessment of the objective and subjective evidence of the Company. The Company will continue to assess the realizability of deferred tax assets at each balance sheet date in order to determine the proper amount, if any, required for a valuation allowance.
There are outside basis differences related to the Company’s investment in subsidiaries for which no deferred taxes have been recorded as these would not be subject to tax on repatriation as Bermuda has no tax regime for Bermuda exempted limited companies, and the United Kingdom tax regime relating to company distributions generally provides for exemption from tax for most overseas profits, subject to certain exceptions.
As of March 31, 2022, the Company’s net operating losses in Switzerland, United Kingdom and Ireland, were $987.1 million, $39.9 million, and $0.1 million, respectively. The Switzerland net operating losses will begin to expire on March 31, 2025. The net operating losses in the United Kingdom and Ireland can be carried forward indefinitely with annual usage limitations where applicable. As of March 31, 2022, the Company has R&D credit carryforwards in the United States in the amount of $5.9 million which will begin to expire on March 31, 2039 and in California in the amount of $6.1 million which can be carried forward indefinitely.
The U.S. tax attributes may be subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986 (the “Code”), and similar state provisions if the Company experiences one or more ownership changes, which would limit the amount of the tax attributes that can be utilized to offset future taxable income. In general, an ownership change as defined by Section 382, results from the transactions increasing ownership of certain stockholders or public groups in the stock of the corporation of more than 50 percentage points over a three-year period. If a change in ownership occurs in the future, the R&D credit carryforwards could be eliminated or restricted. The Company experienced an ownership change for the purposes of Section 382 and 383 of the Code in December 2019 as a result of the Sumitomo-Roivant Transaction (see Note 6(A)). Due to
the existence of the valuation allowance, limitations created by ownership changes, if any, does not materially impact the Company’s effective tax rate.
The Company files income tax returns in the United Kingdom, Switzerland, Ireland, and the United States federal and certain state and local jurisdictions. The Company is subject to U.S. federal and state tax examinations for tax years ended March 31, 2019 and forward, and is subject to tax examinations in non- U.S. jurisdictions for tax years ended March 31, 2018 and forward. Tax audits and examinations can involve complex issues, interpretations and judgments. The resolution of matters may span multiple years particularly if subject to litigation or negotiation. The Company believes it has appropriately recorded its tax position using reasonable estimates and assumptions, however the potential tax benefits may impact the results of operations or cash flows in the period of resolution, settlement or when the statute of limitations expire.
Activity related to unrecognized tax benefits for the years ended March 31, 2022, 2021, and 2020 is as follows (in thousands):
Year Ended March 31,
202220212020
Beginning of period balance$4,404 $3,177 $— 
Gross increases — prior period tax positions— — 2,067 
Gross decreases — prior period tax positions(235)(128)— 
Gross increases — current period tax positions1,050 1,355 1,110 
End of period balance$5,219 $4,404 $3,177 

The Company’s unrecognized tax benefits increased by $0.8 million and $1.2 million for the tax years ended March 31, 2022 and 2021, respectively. As of March 31, 2022, the Company had unrecognized tax benefits of $5.2 million that if recognized would have an immaterial effect on the Company’s effective tax rate. The Company does not expect that there will be a significant change in the unrecognized tax benefits over the next twelve months. Due to the existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not materially impact the effective tax rate.
It is the Company’s policy to recognize interest and penalties related to income tax matters in income tax expense and include accrued interest and penalties with the related income tax liability in its consolidated balance sheets. There were no interest and penalties for the years ended March 31, 2022, 2021, and 2020. As of March 31, 2022 and 2021, the Company had no accrued interest and penalties related to uncertain tax positions.
In response to the COVID-19 pandemic, many governments have enacted measures to provide aid and economic stimulus. These measures include deferring the due dates of tax payments and other changes to income and non-income-based-tax laws as well as providing direct government assistance through grants and forgivable loans. On March 27, 2020, the U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic and the negative impacts that it had on the global economy and U.S. companies. The CARES Act includes measures to assist companies, including temporary changes to income and non-income-based tax laws. The Company implemented certain provisions of the CARES Act, such as deferring employer payroll taxes through the end of calendar year 2020.
As of March 31, 2022, the Company has deferred $0.9 million of employer payroll taxes, which is included in accrued expenses and other current liabilities on the consolidated balance sheet. As of March 31, 2021, the Company had deferred $1.8 million of employer payroll taxes, of which $0.9 million was included in accrued expenses and other current liabilities and $0.9 million was included in other liabilities on the consolidated balance sheet.