Palantir Technologies, a US-based software company, paid just £2.1 million in corporation tax in the United Kingdom in 2024 despite generating substantial revenues from public sector contracts, according to a recent report. The findings highlight a significant discrepancy between the company’s declared profits and the tax contributions it makes in one of its largest overseas markets.

In 2024, Palantir reported profits of over £25 million in the UK, where it earned £247 million in revenues, primarily from government contracts. Despite this, the effective tax rate in the UK was just over 8%, well below the standard 25% corporation tax rate. Palantir’s UK tax payments were also lower than those in countries such as South Korea, Japan, France, and Germany. The company reportedly holds around £670 million in government contracts globally, including a recent £240 million three-year deal awarded by the UK Ministry of Defence without a competitive tender process.

The discrepancy between Palantir’s revenues and profits declared in the UK is partially attributed to transfer pricing—a common practice where multinational firms allocate profits across different jurisdictions. Although approximately 26% of Palantir’s total revenue is generated outside the US, only about 4% of revenue is accounted for abroad. Analysts suggest this may be due to contracts being officially signed by Palantir’s US entities, which then pay fees to local subsidiaries to deliver services. The firm disclosed £159 million of revenues in UK company filings, lower than the £247 million reported in its stock-market filings.

Palantir’s global effective tax rate is reported to be around 1.4%, with the company paying no federal income tax in the US last year and just over $2.5 million in state taxes. The low tax payments in the US are partly explained by the company’s accumulated tax credits from employee share options and previous losses, which could allow it to avoid paying federal taxes for nearly a decade at current profit levels.

The company’s use of share options to remunerate employees also contributes to lowering its tax liability. While employees are subject to income tax on these shares, this practice shifts some of the tax burden away from Palantir itself.

Palantir’s chief executive, Alex Karp, recently forecast a near doubling of global revenues to $8 billion (£6 billion) in 2024, describing the expected growth as “otherworldly.” The company continues to expand, capitalizing on contracts with public sector bodies such as the National Health Service and the Ministry of Defence.

A spokesperson for Palantir defended its tax practices, stating that the company complies with relevant tax regulations in every jurisdiction where it operates. The spokesperson said transfer pricing is a routine and accepted method used by multinational firms to allocate profits across different units and markets. They also noted that differences in accounting rules can result in variations in revenue reporting between countries. Critics, including trade union representatives, argue that the current system enables large corporations like Palantir to minimize their tax contributions despite lucrative government contracts, calling for reforms to ensure companies pay their fair share.