12. Income Taxes

The components of net loss before tax provision from income taxes are as follows (in thousands):


	Year Ended
	December 31,
	2020		2019		2018
United Kingdom	$	(52,521)	$	(31,906)	$	(22,229)
United States		787		1,044		(13)
Total	$	(51,734)	$	(30,862)	$	(22,242)

The components of the benefit for income taxes are as follows (in thousands):


	Year Ended
	December 31,
	2020		2019		2018
Current income tax provision (benefit)
Federal	$	(24)	$	49	$	(25)
State		(27)		61		7
Total current income tax provision (benefit)		(51)		110		(18)
Deferred income tax (benefit) provision
Federal		(435)		(295)		(167)
State		(238)		(69)		(211)
Total deferred income tax (benefit)		(673)		(364)		(378)
Total benefit from income taxes	$	(724)	$	(254)	$	(396)

A reconciliation of the benefit for income taxes computed at the statutory income tax rate to the benefit for income taxes as reflected in the financial statement is as follows:


	Year Ended
	December 31,
	2020		2019		2018
Benefit for income taxes at statutory rate	19	%	19	%	19	%
(Decreases) increases resulting from:
Federal tax credits	0.9	%	1.3	%	1.1	%
Change in valuation allowance	(15.4)	%	(8.0)	%	(7.2)	%
Net losses surrendered for research credit	(6.2)	%	(5.3)	%	(3.7)	%
Preferred share warrants	—	%	(3.3)	%	(0.6)	%
Impact of statutory rate change	1.8	%	—	%	—	%
Other	1.3	%	(2.9)	%	(6.8)	%
Effective income tax rate	1.4	%	0.8	%	1.8	%

Significant components of the Company’s current and deferred tax assets at December 31, 2020 and 2019, were as follows (in thousands):


	Year Ended
	December 31,
	2020		2019
Deferred tax assets:
Operating loss carryforwards	$	13,657	$	7,082
Research credit carryforwards		1,233		434
Operating lease liability		285		439
Accrued expenses and other		3,050		1,779
Total deferred tax assets		18,225		9,734
Deferred tax liabilities:
Operating lease right-of-use asset		(270)		(422)
Depreciation & amortization		(311)		(326)
Total deferred tax liabilities		(581)		(748)
Valuation allowance		(16,085)		(8,104)
Net deferred tax assets	$	1,559	$	882

During the years ended December 31, 2020, 2019 and 2018, the Company recorded an income tax benefit of $0.7 million, $0.3 million and $0.4 million, respectively. The Company is subject to United Kingdom corporate taxation. Due to the nature of its business, the Company has generated losses since inception and therefore not paid United Kingdom corporation tax. The Company's income tax benefit is mainly the result of deferred tax assets benefited in the United States that do not have a valuation allowance against them because of profits that will be generated by an intercompany service agreement.

The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realization of deferred tax assets requires significant judgment. In determining whether its deferred tax assets are more likely than not realizable, the Company evaluated all available positive and negative evidence, and weighed the evidence based on its objectivity. After consideration of the evidence, including the Company's history of cumulative net losses in the U.K., and has concluded that it is more likely than not that the Company will not realize the benefits of its U.K. deferred tax assets and accordingly the Company has provided a valuation allowance for the full amount of the net deferred tax assets in the U.K. The Company has considered the Company's history of cumulative net profits in the United states, estimated future taxable income and concluded that it is more likely than not that the Company will realize the benefits of its United State deferred tax assets and has not provided a valuation allowance against the net deferred tax assets in the United States. The valuation allowance increased in the year ended December 31, 2020 by $8.0 million due to the corresponding increase in UK deferred tax assets, primarily due to operating loss carryforwards generated during the year that were not surrendered for research credit utilization.

The Company recorded a valuation allowance against all of its U.K. deferred tax assets as of December 31, 2020 and 2019.

The Company intends to continue to maintain a full valuation allowance on its U.K. deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. The release of the valuation allowance would result in the recognition of certain deferred tax assets and an increase to the benefit for income taxes for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that the Company is able to actually achieve.

The benefit for income taxes shown on the consolidated statements of operations differs from amounts that would result from applying the statutory tax rates to income before taxes primarily because of certain permanent expenses that were not deductible, U.K., federal and state research and development credits, as well as the application of valuation allowances against the U.K. deferred tax assets.

As of December 31, 2020, the Company had $72.0 million of U.K. operating loss carryforwards and $0 of U.S. federal and state net operating loss carryforwards. The U.K. operating loss carryforwards have an indefinite life. As of December 31, 2020, the Company had $0.8 million and $0.4 million of federal and state research and development credit carryforwards, respectively, that expire at various dates through 2040.

The Company recognizes, in its consolidated financial statements, the effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The Company had no uncertain tax positions during the years ended of December 31, 2020 and 2019. There are no amounts of interest or penalties recognized in the consolidated statements of operations or accrued on the consolidated balance sheet for any period presented. The Company does not expect any material changes in these uncertain tax benefits within the next 12 months.

The Company files income tax returns in the United Kingdom, and in the United States for federal income taxes and in the Commonwealth of Massachusetts for state income taxes. In the normal course of business, the Company is subject to examination by tax authorities in these jurisdictions. The 2019 and 2018 tax year remains open to examination the by HM Revenue & Customs. The statute of limitations for assessment with the Internal Revenue Service is generally three years from filing the tax return. As such, all years since 2017 in the U.S. remain open to examination. The Company is currently not under examination by jurisdictions for any tax years.