Annual report pursuant to Section 13 and 15(d)

Income Tax

v3.22.4
Income Tax
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Tax
9.    Income Tax
Net loss from operations before income taxes for the years ended December 31, 2022, 2021 and 2020 including the following components:
For the Year Ended December 31,
2022 2021 2020
$’000 $’000 $’000
U.K. 6,638  113,826  (162,325)
U.S. (223,286) (194,407) (44,066)
Rest of world (4,867) (4,300) (1,998)
Total loss before income taxes (221,515) (84,881) (208,389)

Tax benefit / (provision) for income taxes was comprised of the following components:
For the Year Ended December 31,
2022 2021 2020
$’000 $’000 $’000
Current
U.K. (850) (784) (4,639)
U.S. federal —  —  — 
U.S. state (141) (77) — 
Rest of world (13) (2) — 
Total (1,004) (863) (4,639)
Deferred
U.K. —  —  — 
U.S. federal 939  1,827  — 
U.S. state 131  479  — 
Rest of world —  —  — 
Total 1,070  2,306  — 
Tax benefit (provision)
 66  1,443  (4,639)
The Deferred tax liability consisted of the following:
As of December 31,
2022 2021
$’000 $’000
Deferred tax assets:
Net operating loss carryforwards 233,585  167,123 
Other intangibles assets 3,688  6,016 
Capitalized start-up costs 5,552  5,291 
Stock-based compensation 25,445  16,525 
Tax credit carryforwards 2,777  1,872 
Premium deficiency reserve 5,865  13,043 
Research expenditures 7,063  — 
Other 12,113  7,185 
Total deferred tax assets 296,088  217,055 
Less: valuation allowance (287,343) (208,525)
Total deferred tax assets, net 8,745  8,530 
Deferred tax liabilities:
Property, plant and equipment 38  3,085 
Other intangible assets(1)
4,423  6,342 
Other 4,284  168 
Total deferred tax liabilities 8,745  9,595 
Net of deferred tax assets and liabilities —  1,065 
(1) Other intangible assets includes goodwill
As of December 31, 2022, the Company had net operating loss carryforwards (“NOL”), before the application of the relevant tax rate, of $592.5 million, $316.8 million, and $204.0 million, for U.K., U.S. federal, and U.S. state purposes, respectively. The U.K. net operating losses can be carried forward indefinitely. Additionally, due to the Tax Cuts and Job Act, U.S. federal NOL generated after December 31, 2017 have an indefinite life. Of the Company’s $316.8 million U.S. federal NOLs, $295.0 million was generated after December 31, 2017 and have an indefinite life. The remaining $21.7 million of U.S. federal NOLs were generated on or before December 31, 2017 and will expire beginning in 2031, if not utilized. The U.S. state NOLs will expire beginning in 2036, if not utilized. Full realization of the NOLs is dependent on generating sufficient taxable income prior to their expiration. As of December 31, 2022, the Company has $2.7 million of R&D credits in the U.K. that do not expire. The ability to realize the NOLs and other deferred tax assets could also be limited by previous or future changes in ownership in accordance with rules in Internal Revenue Code Sections 382. However no such events have occurred to limit any NOL utilization.

As a result of the Company’s evaluation of the valuation allowance used against its deferred tax assets, The Company concluded that it is more likely than not, that all or some portion of the deferred tax assets will not be realized. Accordingly, the Company has a valuation allowance of $287.3 million (2021: $208.5 million, 2020: $95.9 million) against its deferred tax assets primarily consisting of net operating loss carryforwards. The net change in the total valuation allowance for each years ended December 31, 2022 and 2021 was an increase of $78.8 million and $112.6 million, respectively, primarily consisting of net operating loss carryforwards in relation to continuous operations. In addition, the valuation allowance decreased by approximately $3.3 million in FY21 due to the acquisition of $2.6 million and $0.7 million of deferred tax liabilities from the acquisitions of Meritage Medical Network and Higi SH Holdings, Inc., respectively.

The Company is subject to taxation in the U.K., U.S. and other various foreign jurisdictions. All net operating losses generated to date are subject to adjustment for U.S. federal and state income tax purposes. Additionally, all tax years remain open to examination as of December 31, 2022 with the exception of tax years beginning in 2021 in the U.K.
The reconciliation of the U.K. statutory income tax rate, to the Company’s effective tax rate, done on the basis that the company is a UK domicile income tax payer, consisted of the following:
For the Year Ended December 31,
2022 2021 2020
Tax at statutory income tax rate (19.0) % (19.0) % (19.0) %
Benefit of foreign operations (2.2) % (0.3) % —  %
Change in valuation allowance 32.1  % 57.8  % 17.3  %
Expenses not deductible for tax purposes 4.1  % 6.9  % 2.0  %
Non-taxable income —  % (1.2) % —  %
Change in fair value of Earnout liabilities (15.7) % (46.3) % —  %
Impairments 3.5  % —  % —  %
All other, net (2.8) % 0.4  % 1.9  %
Benefit / (provision) for income taxes —  % (1.7) % 2.2  %
The Group recognizes the tax benefits of a tax position only after determining that the relevant taxing authority would more likely than not sustain the position upon an examination. For tax positions meeting the more likely than not threshold, the amount recognized in the Consolidated Financial Statements is the largest amount that has greater than 50% likelihood of being realized upon settlement with the relevant taxing authority. As of December 31, 2022, 2021, and 2020, the Group had no unrecognized tax benefits.