United Kingdom (U.K.) Research and Development Incentives

3 Months Ended

Mar. 31, 2020

Other Income and Expenses [Abstract]

United Kingdom (U.K.) Research and Development Incentives

United Kingdom (U.K.) Research and Development (R&D) Tax Relief Scheme

We conduct extensive research and development activities that benefit from U.K.’s small and medium-sized enterprises (SMEs) R&D tax relief scheme. Under this tax relief scheme, a SME has an option to receive an enhanced U.K. tax deduction on its eligible R&D activities or, when an SME entity is in a net operating loss position, can elect to surrender net operating losses that arise from its eligible R&D activities in exchange for a cash payment from the U.K. tax authorities. As the tax incentives may be received without regard to an entity’s actual tax liability, they are not subject to accounting for income taxes. Amounts recognized by us for cash payment claims under the SME R&D tax relief scheme are recorded as a component of other income after an election for tax relief has been made by submitting a claim for a discrete tax year and collectability is deemed probable and reasonably assured.

As of December 31, 2019, we submitted claims as an SME for a total amount of $19.7 million, consisting of tax credit cash rebates of $9.9 million and $9.8 million for our 2017 and 2018 tax years, respectively. In April 2020, we received correspondence from the U.K. tax authorities informing us the claim has been approved. As a result, the amount of the claim was recorded as other receivable on the condensed consolidated balance sheet at March 31, 2020 and recognized as a component of other income on the condensed consolidated statement of operations for the three months ended March 31, 2020. For our 2019 tax year, we have not yet decided whether to seek tax relief by surrendering some of our losses for a tax credit cash rebate claim or electing to receive enhanced U.K. tax deductions on our eligible research and development activities. Under the U.K’s tax legislation, there is a two-year window after the end of a tax year to seek relief under this tax relief scheme.