The software group Palantir paid just £2m in corporation tax in the UK in 2024, despite holding public sector contracts worth hundreds of millions, thanks to tax breaks that are likely to reduce its contributions to governments around the world for years to come.

The US-headquartered company, which has harnessed AI to secure lucrative work for the NHS and the Ministry of Defence, is growing exponentially.

Palantir’s shares bounced 17% in early trading on Tuesday after its chief executive, Alex Karp, forecast worldwide revenues would almost double this year to $8bn (£5.95bn), a result that he described as “otherworldly”.

But the amount of tax Palantir pays compared to profits earned – its effective tax rate – is just 1.4% globally, according to a report published on Wednesday by the Centre for International Corporate Tax Accountability and Research (Cictar).

In the US last year, the company paid nothing in federal taxes and just over $2.5m in state taxes, the report states.

Andrea Egan, general secretary at the trade union Unison, which commissioned the report, said: “Systems that enable tax to be shirked on an industrial scale clearly have to change. The likes of Palantir need to stump up what’s due. Tech giants raking off billions in profit shouldn’t be free to pay what they please. Ministers shouldn’t award contracts to run public services to firms that are starving them of cash.”

The UK is Palantir’s biggest market outside the US, with £247m of revenues declared by the company for 2024, the most recent year covered by the report, while the majority of its non-US workforce – about 750 employees – are based in Britain.

As of 2026, Palantir holds an estimated £670m in government contracts. A three-year, £240m deal with the MoD was awarded last December without a competitive tender.

In 2024 the company paid just £2.1m in UK corporation tax, despite declaring profits of over £25m, giving an effective tax rate of just over 8%, researchers found. The UK corporation tax rate was 25% that year and remains at that level.

Despite the size of the UK market, tax collected here was less than in South Korea, Japan, France or Germany.

One reason, according to the researchers, is that Palantir is accounting for its UK revenues in the US, a practice sometimes referred to as transfer pricing. “A major pattern emerges of Palantir shifting revenues and profits from contracts in Europe to the US parent company to take advantage of the massive tax shelter it has created there,” they said.

While 26% of all Palantir revenue is sourced from customers outside the US, only 4% of revenue is booked abroad. The reason for this is not clear, but researchers said they believed contracts with customers were signed with Palantir’s US companies, which in turn paid a service fee to local country subsidiaries to deliver the work.

For example, Palantir disclosed £159m of revenues in its UK company filings for 2024, but disclosed £247m of UK revenues in its stock market filings.

A spokesperson for Palantir said the company complied with the tax regimes in the jurisdictions in which it operated, and criticising its use of transfer pricing was “simply not credible”. They said: “Transfer pricing, which allocates a company’s profits among entities within the Palantir group of companies, is an entirely standard practice that is virtually universal for large multinational companies.”

They said accounting practices could lead to different filings in different countries, and it was common for US parent companies, as the ultimate owners of the products sold, to record revenues earned abroad.

Another way in which Palantir cuts its tax bill is by granting share options to staff. The company can reduce what it owes by the amount the shares are worth when they vest. Employees are liable for income tax on their share options, often at higher rates, but the use of shares rather than cash to pay staff shifts the tax burden from the company to its employees.

A Palantir spokesperson said this was “a completely standard tax measure established under the previous Labour government [in the UK]”, designed to give employees a real stake in a business. “Crucially, it means that more tax is paid because corporation tax is 25%, whereas for these shares, income tax, which is higher, is due.”

In the US, Palantir has stored up billions in tax credits from share options, and losses carried forward from previous years, meaning that at the current rate of profit, it would not be liable for US federal income tax payments for “nearly a decade”, the report states.

Like other US companies, Palantir is also a beneficiary of tax cuts implemented under Donald Trump, who reduced the rate for corporations from 35% to 21% during his first term as president. In his second term, he negotiated a carve-out from an international agreement to impose a minimum tax rate of 15% on large multinationals.

“While profits are earned in European markets, much of that income is returned to the US in the form of related party payments,” the report states. “While some level of related party payments may be justified, it appears that Palantir’s efforts are intentionally and artificially reducing taxable income and income tax payments across its European operations.”

Palantir said it paid $148m in UK employment taxes last year, a figure that included employer national insurance contributions and some income tax paid on behalf of staff.