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Income Taxes
 12 Months Ended
Dec. 31, 2024
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,
20242023
United Kingdom(156,711)(120,320)
Foreign3,183 2,636 
Loss before provision for income taxes(153,528)(117,684)
The provision for income taxes for the years ended December 31, 2024 and 2023 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,
20242023
Current income tax provision
United Kingdom$— $— 
Foreign2,031 1,893 
Total current expense:$2,031 $1,893 
Deferred income tax benefit:
United Kingdom— — 
Foreign(437)(1,113)
Total deferred income tax benefit:$(437)$(1,113)
Total provision for income taxes$1,594 $780 
A reconciliation of income tax expense computed at the statutory UK corporation tax rate to income taxes as reflected in the consolidated financial statements is as follows (in thousands):
Year Ended December 31,
20242023
Corporation tax at UK statutory rate
$(38,382)$(27,656)
Permanent differences27 1 
UK R&D tax credit14,375 10,720 
Change in valuation allowance25,410 20,971 
State income taxes57 23 
Deferred tax asset true-up676 187 
Return to provision
(1,214)(2,259)
Share-based compensation
774 33 
Change in UK tax rate
— (1,258)
Other(129)18 
$1,594 $780 
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 consist of the following (in thousands):
Year Ended December 31,
20242023
Net operating loss carryforward$84,927 $64,747 
Reserves and accruals647 564 
Share-based compensation18,205 14,159 
Charitable contributions126 36 
Total deferred tax assets103,905 79,506 
Valuation allowance$(100,090)$(76,072)
Depreciation(41)(98)
Total deferred tax liabilities(41)(98)
Net deferred tax assets$3,774 $3,336 
As of December 31, 2024 and 2023, the Company had UK net operating loss carryforwards of approximately $339.7 million, and $252.3 million, respectively, that can be carried forward indefinitely.
Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2024 and 2023 related primarily to the increases in net operating loss and were as follows (in thousands):
Year Ended December 31,
20242023
Valuation allowance at beginning of year$76,072 $51,909 
Increases recorded to income tax provision25,411 20,971 
Increases recorded to CTA(1,393)3,192 
Valuation allowance at end of year$100,090 $76,072 
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, 2024 and 2023, 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, 2024 and 2023. 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, 2024 and 2023.
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, 2024 and 2023, 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 corporation tax returns in the UK and income tax returns in the 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 UK. The Act increased the main corporation tax rate from 19% to 25% effective April 1, 2023 and enhanced 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 are offset by the valuation allowance maintained against the Company’s UK net deferred tax assets.