XML 87 R17.htm IDEA: XBRL DOCUMENT v3.24.0.1
Taxation
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Taxation Taxation
Verona Pharma plc operates in the United Kingdom and Verona Pharma, Inc. in the United States and they are subject to income taxes in those countries. For the year ended December 31, 2023 the U.K. corporation tax is charged at 23.5% and the U.S. Federal Income tax rate is 21%.
The components of (profit)/loss before income taxes are as follows (in thousands):
December 31,
20232022
United States$(7,429)$(3,868)
United Kingdom61,324 72,316 
Total$53,895 $68,448 
The components of income tax expense are as follows (in thousands):
December 31,
20232022
United States$474 $253 
United Kingdom— — 
Total current tax expense
$474 $253 
United States$— $— 
United Kingdom— — 
Total deferred tax expense— — 
Total income tax expense
$474 $253 
A reconciliation of the U.K. statutory income tax rate to our effective income tax rate is as follows (in percentages):
December 31,
20232022
U.K. tax rate23.5 %19.0 %
Non-deductible expenses(8.0)%(1.8)%
Research and development incentive(4.1)%(8.0)%
Share options exercised5.4 %2.1 %
Change in deferred tax valuation allowance(18.1)%(11.6)%
Other differences0.4 %(0.1)%
Effective income tax rate(0.9)%(0.4)%
Components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
December 31,
20232022
Deferred tax liabilities:
Contingent liability (1)
$(53,851)$(34,565)
Total deferred tax liabilities(53,851)(34,565)
Deferred tax assets:
Net operating losses54,012 38,893 
IPR&D asset (1)
47,793 32,700 
Future exercisable shares7,548 11,964 
Other21 (516)
Total deferred tax assets109,374 83,041 
Less: valuation allowance(55,523)(48,476)
Deferred tax assets, net of valuation allowance$— $— 
Movements in the deferred tax valuation allowance
Valuation allowance at January 1$48,476 $30,252 
Change in tax rates(851)— 
Increase in valuation allowance
7,898 18,224 
Valuation allowance at December 31$55,523 $48,476 
(1) These relate to the difference in the tax base of the IP R&D asset and assumed contingent liability and the financial reporting base, which is nil under U.S. GAAP.
Management has reviewed cumulative tax losses and projections of future taxable losses and determined that it is not more likely than not that they will be realized. Accordingly, valuation allowances have been provided over deferred tax assets.
At December 31, 2023 and December 31, 2022, the Company had U.K. net operating losses (“NOLs”) of $216.0 million and $155.6 million, respectively. The NOLs can be carried forward indefinitely to be offset against future taxable profits, but this is restricted to an annual £5 million allowance after which there will be a 50% restriction in the profits that can be covered by losses brought forward.
The Company files separate income tax returns in the U.K. and the U.S. All necessary income tax filings have been completed for all years up to and including December 31, 2022. The Company’s R&D Tax Incentive Claim for the year ended December 31, 2022 is currently under routine review by HMRC. No material adjustments are expected to be made to the claimed amount as a result of this review. No interest or penalties were recognized in the Consolidated Statements of Operations and Comprehensive Loss or Consolidated Balance Sheets. As of December 31, 2023, the Company has no uncertain tax positions.