According to a report released by the Centre for International Corporate Tax Accountability and Research, Palantir, the software company, paid just £2.1 million in UK corporation tax in 2024. The company, which operates in the UK under a 25% tax rate, reported profits of over £25 million for that year. This led to an effective tax rate of just over 8% in the UK. It raises questions about the alignment between its profits and the amount of tax it paid.
UK tax compared to other countries
Despite being one of Palantir’s largest markets outside the US, the UK collected far less tax from the company compared to countries like South Korea, Japan, France, and Germany. The report points to transfer pricing as a major factor. Palantir is accused of shifting profits from European operations to its US parent company. This effectively utilizes the significant tax advantages of its headquarters in the United States.
The disparity in the figures is illustrated by the data in the report. For 2024, Palantir’s UK company disclosed £159 million in revenues, but it also filed a separate figure of £247 million in its stock market reports. This inconsistency is attributed to the company's accounting structure, which reportedly uses transfer pricing to shift profits.
Share options shift tax burden
The company has another strategy to reduce its tax liability: granting share options to employees. Under this approach, employees are responsible for paying income tax on the value of the shares when they vest. The tax burden is thus shifted from the company to the individuals. In many cases, the tax rate on employee income can be higher than the corporation tax rate, which further benefits the company.
A Palantir spokesperson defended this practice. They called it “a completely standard tax measure.” They argued that the company is actually paying more in taxes overall. Income tax is higher than the 25% corporation tax rate in the UK.
The report also noted that Palantir has amassed billions in tax credits in the US. These credits, combined with losses carried forward from earlier years, mean that at the current rate of profit, the company could avoid paying US federal income taxes. It could do so for nearly a decade.
Andrea Egan, general secretary at the trade union Unison, which commissioned the report, expressed concern that the current system allows companies like Palantir to avoid paying their fair share of taxes on an industrial scale. The report, published on Wednesday, was conducted by the Centre for International Corporate Tax Accountability and Research. In the UK, Palantir holds an estimated £670 million in government contracts, including a recent three-year, £240 million deal with the Ministry of Defence that was awarded without competition.
Palantir claims that its transfer pricing practices are standard for multinational corporations. It explains that the US parent company records revenue because it is the ultimate owner of the products being sold. The UK market remains its largest outside the US, where it employs around 750 people, a significant portion of its non-US workforce.
Palantir’s global effective tax rate is just 1.4%. Despite its low tax contributions, the company expects its revenues to grow to $8 billion in 2024, and its stock price surged 17% in early trading following a forecast by CEO Alex Karp.
Karp described the projected results as “otherworldly.” However, even with a significant rise in revenue, Palantir did not pay any federal taxes in the US in 2024, highlighting the effectiveness of its strategies in reducing its tax liabilities.
The report also highlighted the benefits Palantir has received from tax cuts implemented during Donald Trump’s presidency. He reduced the corporate tax rate from 35% to 21%, and the company has also benefited from tax credits and previous tax incentives, further easing its financial obligations.