PARLIAMENTARY WRITTEN QUESTION
Railways: Contracts (21 September 2022)

The Department contracts with train operating companies (TOCs) to provide passenger rail services.

Under the contract with the Department, TOCs’ allowable costs are reimbursed by the Department and revenue is passed on to the Department. TOCs earn a management and performance-based fee. The actual performance fee earned depends on evaluation by the Department of performance against specified criteria.

The Department publishes details of payments to passenger rail operators, including fees paid on gov.uk:

https://www.gov.uk/government/publications/dft-payments-to-passenger-rail-operators-under-emergency-agreements

After the fee has been paid, rail operators must apply to the Department for permission to pay dividends to their parent companies, and must meet stringent reporting and financial requirements to the satisfaction of the Department before any dividends may be paid. The provisions on payment of dividends varies between contracts, but under Emergency Recovery Measures Agreements and National Rail Contracts, TOCs may apply annually to the Department for permission to distribute the value of any fees they have earnt (adjusted for tax) and the value of retained earnings pre-Emergency Measures Agreements period to their owning groups as dividends.

The Department does not publish a list of approved dividend payments or applications under consideration. Dividend applications are a matter for the TOCs and the owning groups, and further information would be available in the respective entities’ statutory accounts.