When you hear that Palantir—the data analytics giant behind NHS and Ministry of Defence contracts—paid just £2 million in UK corporation tax, it’s natural to raise an eyebrow. After all, the company’s UK arm pulls in hundreds of millions in revenue. How can a firm that profitable owe so little?
The answer lies in the gap between revenue and profit, and in the legal—but controversial—ways multinational companies structure their finances. This isn’t a story about tax evasion; it’s a story about how the rules work, and why they might not be working as intended.
The £2M Figure in Context
Palantir Technologies UK Ltd, the British subsidiary of the US-based Palantir, reported a corporation tax bill of around £2 million for its 2024 financial year. To understand what that means, you first need to know how corporation tax works.
In the UK, the main rate of corporation tax is 25% for profits above £250,000. So, a £2 million tax bill implies taxable profits of roughly £8 million. That’s a far cry from the hundreds of millions in revenue the company generates from contracts with the NHS, the Ministry of Defence, and other clients.
But revenue is not profit. Palantir’s UK arm has significant costs: salaries for its engineers and consultants, office rents, and—crucially—payments to its US parent company for software licenses, royalties, and management services. These intercompany charges are a standard practice for multinationals, and they can dramatically reduce the taxable profit left in the UK.
The Legal Loopholes (or, How It’s Done)
Multinational companies have long used a playbook to minimise tax in high-tax countries like the UK. Here are the key moves:
- Transfer pricing: The UK subsidiary pays the US parent a fee for using Palantir’s intellectual property. The parent sets that fee, and as long as it’s within what an independent company would pay, it’s legal. But it shifts profit from the UK to the US, where the corporate tax rate is lower (21% after 2018, though it can be even lower with deductions).
- R&D tax credits: Palantir invests heavily in software development, and the UK government offers generous tax relief for research and development. These credits can reduce taxable profits dollar-for-dollar, sometimes even creating losses that can be carried forward.
- Debt financing: The UK subsidiary might borrow from the parent company and pay interest, which is tax-deductible. This further reduces UK taxable profit.
None of this is illegal. It’s the system working as designed. But critics argue it’s a design flaw.
The Ethical Dimension: Public Contracts, Private Profits
What makes Palantir’s case particularly sensitive is its reliance on public money. The NHS’s Federated Data Platform, worth over £330 million, and defence contracts are funded by taxpayers. When a company profits from the public purse while contributing a pittance in corporation tax, it raises questions about fairness.
Tax justice campaigners point out that while Palantir pays other taxes—employer National Insurance, business rates, VAT on some services—corporation tax is the most visible measure of a company’s contribution to the public finances. A £2M bill on hundreds of millions in revenue looks, to many, like a raw deal.
Palantir would counter that it complies with all laws, that its tax bill reflects legitimate business costs, and that it creates high-value jobs and invests in UK tech. It might also note that its global profits are taxed elsewhere, so the UK arm isn’t the ultimate profit centre.
The Bigger Picture: A Systemic Issue
Palantir is not alone. Google, Apple, and Amazon have all faced similar criticism. The UK has introduced measures like the Diverted Profits Tax (the “Google Tax”) and the OECD’s global minimum tax (15% from 2024), but these are patchwork solutions. The fundamental issue is that corporate tax rules were written for a world where companies operated within borders, not across them.
For Palantir, the £2M figure is a reminder that even the most sophisticated companies can legally minimise their tax bills. Whether that’s a problem is a matter of perspective. For shareholders, it’s a feature—maximising after-tax profits. For the public, it’s a bug—especially when those profits come from government contracts.
What Could Change?
Reform is possible but slow. The UK could tighten transfer pricing rules, cap R&D credits for large firms, or adopt a more aggressive stance on profit shifting. But any change would face lobbying from the tech industry and could harm the UK’s attractiveness as a business hub. Meanwhile, HMRC continues to scrutinise such arrangements, but it can only enforce the law as it stands.
For now, Palantir’s £2M tax bill is a case study in how legal tax avoidance works—and why it’s so hard to fix.
Palantir’s £2M UK tax bill is not a scandal in the legal sense—it’s the result of legitimate deductions and intercompany arrangements. But it highlights a growing public concern: when companies profit from public contracts, should they contribute more to the public purse? The debate is not about breaking the law; it’s about whether the law is fair. Until that changes, we’ll likely see more headlines like this.
Summary
- Palantir UK paid £2M in corporation tax for 2024, implying taxable profits of ~£8M at the 25% rate.
- The low bill is due to legal profit-shifting: intercompany fees, R&D credits, and debt interest.
- Revenue ≠ profit; Palantir’s UK arm has high costs that reduce taxable profit.
- The controversy stems from Palantir’s reliance on public contracts (NHS, MoD) while paying relatively little tax.
- This is a systemic issue affecting many tech giants, not just Palantir.
FAQ
Q: Is Palantir evading tax?\nA: No. Evasion is illegal. Palantir is using legal tax planning strategies, such as transfer pricing and R&D credits, to reduce its UK tax bill. The debate is about whether these laws should be changed, not whether Palantir is breaking them.\n\nQ: Why is the tax bill so low if Palantir makes so much revenue?\nA: Because revenue is not profit. Palantir’s UK subsidiary pays for software licenses, management fees, and other costs to its US parent, which reduces its taxable profit. After all deductions, the taxable profit was around £8M, leading to a £2M tax bill.\n\nQ: Does Palantir pay any other taxes in the UK?\nA: Yes. It pays employer National Insurance contributions, business rates, and possibly VAT on some services. Corporation tax is just one part of a company’s tax contribution.\n\nQ: Could Palantir have paid more tax legally?\nA: Possibly, but companies are not required to pay more than the law demands. Palantir’s tax strategy is designed to minimise its liability within the rules, which is a common practice among multinationals.\n\nQ: What can be done to make companies like Palantir pay more tax?\nA: Governments could reform tax rules—for example, by tightening transfer pricing regulations, limiting R&D credits, or implementing a global minimum tax. The OECD’s 15% minimum tax is a step, but it’s not yet fully in effect.