Edinburgh trams: Council hoping for tax break

SCOTLAND’S capital hopes for a tax break to turn a profit from its troubled tram project amid an expected shortfall from tickets alone, says the council.

A tram rides along the test loop at Edinburgh's Gogarburn depot. Picture: Ian Rutherford

The city’s new integrated transport network is projected to make £5 million profit from buses and trams in 15 years, but this relies on £11m of loosely specified “other funding” beyond ticket receipts.

One source of other funding is the hope of making the vast majority of the income from the trams tax deductible.

The council debates the latest proposals today. The meeting papers state: “In order for the [£5m profit] to be achieved, it is critical that Edinburgh Council have in place and exercises the appropriate shareholder controls, takes proactive measures to realise income and tax savings from the opportunities set out and actively monitors the financial position over the term.

“Tax saving of £11m may be possible within the group if the sinking fund payments [tram profits] are allowable as deductions from income for corporation tax purposes.”

Other sources of extra funds include advertising on trams, increased footfall via a partnership with Edinburgh Airport, and a general rise in footfall through “optimal integration” between trams, buses, trains and planes.

Fare “optimisation”, such as charging a premium for airport trips similar to the current Lothian 100 express bus, may also be used but the council has made a commitment to keep tram fares the same as bus fares.

Transport convener Lesley Hinds said: “These figures are provisional but they stack up and, all things considered, Edinburgh’s new transport company is predicted to deliver a surplus.

“Even on its own, the tram is predicted to deliver an operating surplus. The tram and bus service will be fully integrated, with tickets, timetabling and everything else being delivered through one system. This is the same for the finances. Under one company both services need to operate together.

“We’ve already committed that the tram will have no negative financial impact on the bus service and, although the arrangements are still in draft form, we’ll ensure that any dividend drawn from income will go back into Edinburgh’s transport system.

“Whilst this business model and all predictions have been, and continue to be, verified externally, it’s important to remember that they are still predictions. The council will bear the financial risk so I’m determined that numbers are closely and continuously scrutinised as we move towards service.”

The £5m profit relies on a complex chain of ticket receipts, operating costs, tax and shareholder dividends from three companies all feeding into Edinburgh Council.