Note 13 — Income taxes

Loss before income tax expense is as follows (in thousands):

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The amount allocated to the U.S. includes the $22,049,000 gain on bargain purchase.

The components of income tax expense are as follows (in thousands):

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As of December 31, 2023 and 2022 the tax effects of temporary differences and carryforwards that give rise to deferred tax assets and liabilities were as follows (in thousands):

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The valuation allowance is primarily related to deferred tax assets for operating loss and tax credit carry-forwards and temporary differences relating to share-based compensation expense and research and development expenditure. Deferred tax assets have been recognized without a valuation allowance to the extent supported by reversing taxable temporary differences. A valuation allowance has been provided over the remaining deferred tax assets, which management considered are not more likely than not of being realized after weighing all available positive and negative evidence including cumulative losses in recent years and projections of future taxable losses.

The movements in the deferred tax asset valuation allowance for the year ended December 31, 2023 and 2022 are as follows (thousands):

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Reconciliation of the U.K. statutory income tax rate, the income tax rate of the country of domicile of the Company, to the Company's effective income tax rate is as follows (in percentages):

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The Company is headquartered in the United Kingdom and has subsidiaries in the United Kingdom and the United States. The Company incurs tax losses in the United Kingdom. The U.K. corporate income tax rate for the year ended December 31, 2023 was 23.5% and for the years ended December 31, 2022 and 2021 it was 19% in each year. Adaptimmune LLC in the United States has generated taxable profits due to a service agreement between Adaptimmune LLC and the Company’s subsidiaries in the United Kingdom. The U.S. federal corporate income tax rate was 21% for the years ended December 31, 2023, 2022 and 2021, respectively. TCR² has incurred net losses in the United States since acquisition and generates research and development tax credits. TCR²’s deferred tax assets for operating loss and tax credit carryforwards and other tax attributes are reduced by a valuation allowance to the amount supported by reversing taxable temporary differences because there is currently no indication that we will make sufficient taxable profits to utilize these deferred tax assets. Income not taxable primarily relates to the gain on bargain purchase, which only arises at a consolidated level and is not taxable.

The United Kingdom’s Finance Act 2021, which was enacted on June 10, 2021, maintained the corporate income tax rate at 19% up until the year commencing April 1, 2023, at which point the rate rose to 25%. As of December 31, 2023, the Company used a 25% and 21% tax rate in respect of the measurement of deferred taxes existing in the U.K. and the U.S., respectively, which reflects the currently enacted tax rates and the anticipated timing of the reversing of the deferred tax balances.

As of December 31, 2023, we do not have unremitted earnings in our U.S. subsidiaries.

As of December 31, 2023, we had U.K. net operating loss carryforwards of approximately $563,883,000, U.K. expenditure credit carryforwards of $915,000, U.S. net operating loss carryforwards of approximately $366,609,000,

U.S. tax credit carryforwards of $3,759,000 and U.S. capitalized research and development expenditure of $179,519,000. Unsurrendered U.K. net operating loss carryforwards can be carried forward indefinitely to be offset against future taxable profits; however, this is restricted to an annual £5,000,000 allowance in each standalone company or group and above this allowance, there will be a 50% restriction in the profits that can be covered by losses brought forward. U.K. tax credit carryforwards can be carried forward indefinitely to be offset against future tax liabilities of the company. U.S. tax credit carryforwards can be carried forward for 20 years to be offset against future tax liabilities, subject to a minimum tax payment of 25% of the tax charge. The U.S. tax credit carryforwards expire between 2041 and 2043.

Our tax returns are under routine examination in the U.K. and U.S. tax jurisdictions. The scope of these examinations includes, but is not limited to, the review of our taxable presence in a jurisdiction, our deduction of certain items, our claims for research and development credits, our compliance with transfer pricing rules and regulations and the inclusion or exclusion of amounts from our tax returns as filed. The Company is no longer subject to examinations by tax authorities for the tax years 2016 and prior in the U.K. and there are no ongoing enquiries in the U.K. However, U.K. net operating losses from the tax years 2016 and prior would be subject to examination if and when used in a future tax return to offset taxable income. Our U.K. income tax returns have been accepted by His Majesty’s Revenue and Customs through the period ended December 31, 2017. The Company is subject to examinations by taxing authorities in the United States for all tax years 2020 through 2023. We are also subject to audits by U.S. state taxing authorities where we have operations.

Unrecognized tax benefits arise when the estimated benefit recorded in the financial statements differs from the amounts taken or expected to be taken in a tax return because of uncertainties in the tax law. As of December 31, 2023 and 2022, the Company had no unrecognized tax benefits.