|12 Months Ended|
Dec. 31, 2022
|Income Tax Disclosure [Abstract]|
9. Income Tax
Net loss from operations before income taxes for the years ended December 31, 2022, 2021 and 2020 including the following components:
Tax benefit / (provision) for income taxes was comprised of the following components:
The Deferred tax liability consisted of the following:
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:
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.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef