XML 73 R19.htm IDEA: XBRL DOCUMENT v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income (loss) before provision for income taxes consisted of the following (in thousands):
Year Ended December 31,
202220212020
United Kingdom(92,841)(72,397)(60,522)
Foreign1,744 854 220 
Loss before provision for income taxes(91,097)(71,543)(60,302)
The provision for income taxes for the years ended December 31, 2022, 2021 and 2020 was computed at the UK statutory income tax rate. The income tax provision for the years then ended comprised (in thousands):
Year Ended December 31,
202220212020
Current income tax provision
United Kingdom$— $— $— 
Foreign1,865 744 253 
Total current expense:$1,865 $744 $253 
Deferred income tax benefit:
United Kingdom— — — 
Foreign(1,457)(545)(221)
Total deferred income tax benefit:$(1,457)$(545)$(221)
Total provision for income taxes$408 $199 $32 
A reconciliation of income tax expense computed at the statutory UK income tax rate to income taxes as reflected in the consolidated financial statements is as follows (in thousands):
Year Ended December 31,
202220212020
Income taxes at UK statutory rate$(17,309)$(13,592)$(11,458)
Permanent differences14 69 340 
UK R&D tax credit5,423 3,747 1,664 
Change in valuation allowance15,038 29,180 8,683 
State income taxes10 1 (5)
Deferred tax asset true-up8 80 919 
Return to Provision1,580 (854)— 
Equity Compensation(782)(8,302)— 
Change in UK Tax Rate(3,609)(10,147)— 
Other35 17 (111)
$408 $199 $32 
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022, 2021 and 2020 consist of the following (in thousands):
Year Ended December 31,
202220212020
Net operating loss carryforward$44,227 $35,947 $10,075 
Reserves and accruals695 169 62 
Share-based compensation9,332 6,232 3,128 
Charitable contributions33 — — 
Total deferred tax assets54,287 42,348 13,265 
Valuation allowance$(51,909)$(41,483)$(13,000)
Depreciation(154)(99)(44)
Total deferred tax liabilities(154)(99)(44)
Net deferred tax assets$2,224 $766 $221 
As of December 31, 2022, 2021 and 2020, the Company had UK net operating loss carryforwards of approximately $176.9 million, $144.0 million and $53.0 million, respectively, that can be carried forward indefinitely.
Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2022, 2021 and 2020 related primarily to the increases in net operating loss and were as follows (in thousands):
Year Ended December 31,
202220212020
Valuation allowance at beginning of year$41,483 $13,000 $3,665 
Increases recorded to income tax provision15,038 29,180 8,683 
Increases recorded to CTA— — 652 
Decreases recorded to CTA(4,612)(697)— 
Valuation allowance at end of year$51,909 $41,483 $13,000 
Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of December 31, 2022, 2021 and 2020, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and
preceding years. The Company determined that it was not possible to reasonably quantify future taxable income and determined that it is more likely than not that all of the deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance against its net UK deferred tax assets as of December 31, 2022, 2021 and 2020. The deferred tax asset recognized relates entirely to the US entity.
The Company applies the authoritative guidance on accounting for and disclosure of uncertainty in tax positions, which requires the Company to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon the ultimate settlement with the relevant taxing authority. There were no material uncertain tax positions as of December 31, 2022, 2021 and 2020.
The Company will recognize interest and penalties related to uncertain tax positions in income tax expense when in a taxable income position. As of December 31, 2022, 2021 and 2020, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations and comprehensive loss.
The Company and its subsidiaries file income tax returns in the UK and U.S. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the federal, state, or foreign tax authorities, if such tax attributes are utilized in a future period.
During the second quarter of 2021, the Finance Act 2021 (the Act) was enacted in the United Kingdom. The Act increases the corporate income tax rate from 19% to 25% effective April 1, 2023 and enhances the first-year capital allowance on qualifying new plant and machinery assets effective April 1, 2021. The effects on the Company’s existing deferred tax balances have been recorded and is offset by the valuation allowance maintained against the Company’s U.K. net deferred tax assets.