The reaction this story is designed to produce is outrage, and outrage is the least useful thing an owner can do with it. My reaction is different, and it is this: of the two mechanisms that took Palantir's UK corporation tax rate down to roughly 8%, one is genuinely closed to you and one is wide open — and the open one had its eligibility rules relaxed on 6 April this year, four months ago, with almost nobody noticing.
So the honest read is not "big tech cheats and we can't". It is that a great many British companies are paying the full 25% while leaving a legitimate, statutory, deliberately-designed deduction entirely untouched — the very same deduction that a US software giant has industrialised. That is worth twenty minutes of your attention in a way that being annoyed on the internet is not.
What the report actually found
The figures come from a report by the Centre for International Corporate Tax Accountability and Research (Cictar), commissioned by the trade union Unison and published on Wednesday. As the Guardian reports it:
- In 2024 Palantir paid £2.1m in UK corporation tax despite declaring profits of over £25m — an effective rate of just over 8%, against a UK main rate of 25% that year and now.
- Its global effective tax rate is 1.4%. In the US last year it paid nothing in federal taxes and just over $2.5m in state taxes.
- The UK is its biggest market outside the US, with £247m of revenues declared for 2024 and about 750 employees here. Tax collected in the UK was less than in South Korea, Japan, France or Germany.
- As of 2026 it holds an estimated £670m in UK government contracts, including a three-year, £240m MoD deal awarded last December without a competitive tender.
Palantir's response deserves equal billing, because it is not a no-comment. A spokesperson said the company complies with the tax regimes in the jurisdictions in which it operates, that criticising its use of transfer pricing is "simply not credible", and that transfer pricing is "an entirely standard practice that is virtually universal for large multinational companies". The company also says it paid $148m in UK employment taxes last year, covering employer National Insurance and some income tax paid on behalf of staff. That last number is the one most of the coverage skipped, and it is a fair point: employment taxes are real money and they dwarf the corporation tax line.
Mechanism one: transfer pricing. Forget it — it isn't yours.
The researchers found that while 26% of all Palantir revenue is sourced from customers outside the US, only 4% of revenue is booked abroad. Their explanation is that customer contracts are signed with Palantir's US entities, which then pay a service fee to the local subsidiary that does the delivery work. The visible fingerprint is the mismatch: £159m of revenue in the UK company filings for 2024 against £247m of UK revenue in the stock market filings.
This is not available to you, and I want to be blunt about why. Transfer pricing only exists as a lever if you have entities in more than one tax jurisdiction with genuine functions to allocate between them. Setting up an offshore entity to invoice your own UK trade is not tax planning, it is the thing HMRC's diverted profits rules and transfer pricing regime were built to catch — and the UK's transfer pricing rules exempt most small and medium enterprises from the compliance burden precisely because the structures are not meaningfully open to them. If anyone offers you a version of this, the answer is no.
Mechanism two: share options. This one is yours, and the door got wider in April.
The second lever is the interesting one. As the Guardian describes it, Palantir grants share options to staff, and the company reduces what it owes by the amount the shares are worth when they vest. Palantir's spokesperson defended it directly as "a completely standard tax measure established under the previous Labour government" in the UK, designed to give employees a real stake in a business.
They are right that it is standard. The UK gives companies a statutory corporation tax deduction on employee share acquisitions under Part 12 of the Corporation Tax Act 2009, and the everyday route for a private trading company is an Enterprise Management Incentive scheme. On 6 April 2026 the eligibility limits were raised substantially: GOV.UK now gives them as assets of £120 million or less and fewer than 500 full-time employees, where on or before 5 April 2026 the test was £30 million and 250 employees. Options can run to £250,000 per employee over three years.
The worked numbers
Take a company with £300,000 of taxable profit, no associated companies, a 12-month accounting period. Illustrative, but a completely ordinary shape for a growing UK business.
- Profit is above £250,000, so the main rate applies with no Marginal Relief: £300,000 × 25% = £75,000 of corporation tax.
- Now say it granted EMI options to four key people three years ago at the then market value of £50,000, and they exercise this year when those shares are worth £150,000.
- The statutory deduction is the difference: £100,000. Taxable profit drops to £200,000.
- At £200,000 the company is in the Marginal Relief band. Tax at 25% is £50,000, less Marginal Relief of 3/200 × (£250,000 − £200,000) = £750. Corporation tax becomes £49,250, an effective 24.6%.
- Tax saved: £25,750. Cash that left the business to achieve it: nil.
The employee side is the part that makes it work rather than merely cheap. If the options were granted at market value, there is no income tax or National Insurance on exercise. The employee pays capital gains tax when they eventually sell, and where Business Asset Disposal Relief conditions are met the rate is 18% on qualifying disposals from 6 April 2026, up from 14% in the year before. That is a materially better outcome for them than the same value delivered as a bonus through payroll — which is precisely the trade Palantir's spokesperson was describing when they said the burden shifts from company to employee.
And while we are on deductions people leave sitting there: the Annual Investment Allowance is £1 million. A company that spent £40,000 on equipment and quietly put it into the main pool at 18% writing down allowances gets a £7,200 deduction this year — £1,800 of tax at 25%. Claim the AIA instead and the full £40,000 comes off, worth £10,000. Same purchase, £8,200 difference in year one.
What it means in practice — and it depends who you are
If you have key people you are worried about losing. This is the case for EMI and the corporation tax deduction is the second reason, not the first. You are trying to hold a person; the tax treatment is what makes holding them affordable. Start with who, and how much of the business, before you go anywhere near a valuation.
If you sat outside the old EMI limits. Re-test yourself. If your company was over £30m of gross assets or over 250 full-time employees, you were out on 5 April 2026 and you may well be in on 6 April 2026. Nobody will write to tell you this.
If you are a one-person limited company. None of the share-scheme material applies in any useful way — you cannot meaningfully incentivise yourself with your own equity. Your levers are the ordinary ones: the salary and dividend split, employer pension contributions, and claiming capital allowances properly. Worth a look before the Budget on 28 October, not after.
If you are a sole trader or partnership. Corporation tax is not your tax at all, and none of the above changes your position. The read-across is the AIA point only.
Two things to do this week
1. Work out your real effective rate. Not the headline rate — yours. Take last year's taxable profit and the corporation tax actually charged, and divide. If you are between £50,000 and £250,000 of profit, run it through HMRC's own tool at gov.uk/marginal-relief-calculator and confirm the Marginal Relief was claimed and that your associated company count is right. Associated companies are the single most common error here, and they cut both thresholds.
2. Re-run the EMI eligibility test against the new limits. Two numbers: gross assets and full-time employee count. Compare them to £120 million and 500 on the GOV.UK EMI page, and check your trade is not on the excluded list — banking, farming, property development, legal services and ship building are all out. If you clear it, the next step is an agreed valuation with HMRC, and that takes time, so starting in August rather than March matters.
What is still uncertain, and when you will know
The Cictar report is a researchers' analysis of published filings, and Palantir disputes its framing rather than its arithmetic. The company's position — that different accounting practices produce different filings in different countries, and that US parents commonly record revenue earned abroad — is a real answer, not a deflection, and no tribunal or HMRC enquiry has tested any of it. Treat the 8% as what it is: an effective rate calculated from filings, not a finding of wrongdoing.
The policy question is live and lands on a date. Trump negotiated a carve-out from the international agreement to impose a 15% minimum tax rate on large multinationals, which is why the global 1.4% figure persists. Whether the UK responds, and how, sits with the Chancellor's Budget on 28 October 2026. Nothing about your own EMI or capital allowances position depends on that outcome, which is the argument for getting on with both now.
Getting the effective rate right, claiming the allowances that are already yours and setting up a share scheme that survives contact with HMRC is ordinary tax planning work, and it is included for clients on our accountancy packages rather than billed as an extra. If you cannot currently say what your effective rate was last year without opening a file, that is a management accounts problem before it is a tax one.