Two mechanisms took Palantir's UK corporation tax rate down to roughly 8%. Transfer pricing is not available to a typical UK company, but the corporation tax deduction for employee share options is, and its eligibility rules were relaxed on 6 April this year.
Many British companies pay the full 25% without claiming this statutory deduction.
What the report 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.
A Palantir 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 is far more than its UK corporation tax.
Transfer pricing
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 filings show the gap: £159m of revenue in the UK company filings for 2024 against £247m of UK revenue in the stock market filings.
Transfer pricing only applies if you have entities in more than one tax jurisdiction with genuine functions to allocate between them. HMRC's diverted profits rules and transfer pricing regime are designed to catch an offshore entity set up to invoice your own UK trade, and the UK's transfer pricing rules exempt most small and medium enterprises from the compliance requirements. Turn down anyone who offers you a version of this.
Share options, with wider eligibility since April
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.
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.
Worked example: EMI options and corporation tax
Take an illustrative company with £300,000 of taxable profit, no associated companies and a 12-month accounting period.
- 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, with no cash paid out by the business.
For the employee, 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 leaves them with more than the same value paid as a bonus through payroll.
The Annual Investment Allowance is £1 million, and it is another deduction companies often miss. A company that spent £40,000 on equipment and 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. That is £8,200 more tax relief in year one on the same purchase.
What it means for different businesses
If you have key people you are worried about losing. EMI is mainly a way to keep key staff, and the corporation tax deduction helps make it affordable. Decide who would get options, and how much of the business, before you get 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.
If you are a one-person limited company. Share schemes are of little use when you are the only shareholder and employee. Look instead at the salary and dividend split, employer pension contributions and your capital allowance claims before the Budget on 28 October.
If you are a sole trader or partnership. You pay income tax rather than corporation tax, so only the Annual Investment Allowance point applies to you.
What to do this week
1. Work out your real effective rate. 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 a common error here, and they reduce 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, which takes time, so start now.
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 — and no tribunal or HMRC enquiry has tested any of it. The 8% is an effective rate calculated from filings, and no finding has been made against the company.
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. Your own EMI and capital allowances position does not depend on that outcome, so you can act on both now.
Checking your effective rate, claiming the allowances you are entitled to and setting up a share scheme that meets HMRC's conditions is part of our tax planning work, included for clients on our accountancy packages at no extra charge. If you cannot say what your effective rate was last year without opening a file, regular management accounts will give you that figure.
