7. Annual accounts

Financial statements

Statement of Comprehensive Net Expenditure for the year ended 31 March 2026

	Note	£’000 Staff Costs	£’000 Other Costs	£’000 Income	2025-26 £’000 Total	2024-25 £’000 Total
Administration costs
Staff costs	2	19,628	427	-	20,055	18,136
Other administration costs	3	-	4,338	-	4,338	3,814
Total administration costs					24,393	21,950
Programme costs
Staff costs	2	22,134	482	-	22,616	20,184
Other programme costs	4	-	3,483,660	-	3,483,660	3,136,950
Income	5			(33,343)	(33,343)	(12,244)
Total programme costs					3,472,933	3,144,890
Total		41,762	3,488,907	(33,343)	3,497,326	3,166,840
Net operating costs for the year ended 31 March 2026					3,497,326	3,166,840

Other Comprehensive Expenditure

Other Comprehensive Net Expenditure	Note	2025-26 £’000 Total	2024-25 £’000 Total
Items that will not be reclassified to net operating costs:
Net (gain) / loss on:
-revaluation of property, plant and equipment	6	960,331	(196,415)
-revaluation of intangibles	6	-	-
Total comprehensive net expenditure for the year ended 31 March 2026		4,457,657	2,970,425

Statement of Financial Position as at 31 March 2026

	Note	£’000	31 March 2026 £’000	£’000	31 March 2025 £’000
Non-current assets
Property, Plant and Equipment	6	28,717,530		27,755,102
Right of Use Asset	7	12,999		26,967
Financial Assets	9	544,687		464,261
Other Receivables	10	33,622		25,621
Total non-current assets			29,308,838		28,271,951
Current assets
Financial assets	9	25,824		26,802
Trade and other receivables	10	181,264		128,530
Cash & cash equivalents		15		15
Total current assets			207,103		155,348
Total assets			29,515,941		28,427,297
Current Liabilities
Trade and other payables incl IFRS 16 leases	11	(294,534)		(283,963)
Provisions	12	(10,288)		(10,128)
Total current liabilities			(304,822)		(294,091)
Total assets less current liabilities			29,211,119		28,133,206
Non-current liabilities
Other payables and financial liabilities incl IFRS 16 leases	11	(931,065)		(975,154)
Provisions	12	(23,167)		(8,948)
Total non-current liabilities			(954,232)		(984,103)
Assets less liabilities			28,256,887		27,149,103
Taxpayers’ equity
General fund	SoCTE		13,079,710		12,187,205
Revaluation reserve	SoCTE		15,177,177		14,961,898
Total taxpayers’ equity			28,256,887		27,149,103

The Notes to pages 111-165 form part of these accounts.

Alison Irvine
Chief Executive

The Accountable Officer authorised these financial statements for issue on 5 October 2026.

Statement of Cash Flows for the year ended 31 March 2026

		2025-26	2024-25
	Note	£'000	£'000
(A) Cash flows from operating activities
Net operating cost	SoCNE	(3,497,326)	(3,166,841)
Adjustments for non-cash transactions	3/4	302,038	82,758
Decrease / (increase) in trade and other receivables	13	(60,735)	(23,633)
Increase / (decrease) in trade and other payables	13	21,757	16,368
Increase / (decrease) in provisions	13	14,380	2,844
Adjustment for interest element of PFI contracts	4	72,230	73,517
Net cash outflow from operating activities		(3,147,656)	(3,014,988)
(B) Cash flows from investing activities
Purchase of property, plant and equipment	6	(277,959)	(215,787)
Increase / (decrease) in capital accruals	13	(11,506)	(36,085)
Increase/ (decrease) in Voted loans and Other Funds	9	(79,448)	(69,518)
Net cash outflow from investing activities		(368,913)	(321,390)
(C) Cash flows from financing activities
Funding from the Scottish Government	SoCTE	3,632,569	3,452,777
Capital element of payments On Balance Sheet PFI contracts	13	(43,187)	(41,885)
Capital element of payments - IFRS 16 Finance Leases	13	(584)	(982)
Interest element of PFI contracts	4	(72,230)	(73,517)
Net Financing		3,516,569	3,336,393
Net increase / (decrease) in cash and cash equivalents in the period		-	15
Cash and cash equivalents at the beginning of the period		15	-
Cash and cash equivalents at the end of the period		15	15

Statement of Changes in Taxpayers Equity for the year ended 31 March 2026

	Note	General Fund	Revaluation Reserve	Total Reserves
		£'000	£'000	£'000
Balance at 31 March 2025		12,187,206	14,961,897	27,149,103
Changes in taxpayers' equity for 2025-26
Net gain / (loss) on revaluation of property, plant and equipment	6	-	960,331	960,331
Roads historic value adjustment	6	12,210	-	12,210
Realised element of the revaluation reserve		745,051	(745,051)	-
Non-cash charges - auditors remuneration	3	215	-	215
Net operating costs for the year	SoCNE	(3,497,541)	-	(3,497,541)
Total recognised income and expense for 2025-26		(2,740,065)	215,280	(2,524,785)
Funding from Scottish Government		3,632,569	-	3,632,569
Balance at 31 March 2026		13,079,710	15,177,177	28,256,887

	Note	General Fund	Revaluation Reserve	Total Reserves
		£'000	£'000	£'000
Balance at 31 March 2024		12,471,914	14,723,169	27,195,083
Changes in taxpayers' equity for 2024-25
Net gain / (loss) on revaluation of property, plant and equipment	6	-	(196,417)	(196,417)
Roads historic value adjustment	6	(135,500)	-	(135,500)
Realised element of the revaluation reserve		(435,145)	435,145	-
Non-cash charges - auditors remuneration	3	206	-	206
Net operating costs for the year	SoCNE	(3,167,046)	-	(3,167,046)
Total recognised income and expense for 2024-25		(3,737,485)	238,728	(3,498,756)
Funding from Scottish Government		3,452,777	-	3,452,777
Balance at 31 March 2025		12,187,206	14,961,897	27,149,103

Notes to the accounts

The financial statements are consolidated within the Scottish Government Consolidated Accounts.

Note 1 - Significant accounting policies

The areas where accounting judgements have a significant impact are outlined within note 1.22.

1. Statement of accounting policies

The financial statements have been prepared on a going concern basis and in accordance with the 2025-26 Government Financial Reporting Manual (FReM) issued by HM Treasury. The accounting policies applied by Transport Scotland are described in this section. The accounts are prepared using, where necessary, estimation techniques which are selected as the most appropriate for the purpose of giving a true and fair view in accordance with the principles set out in International Accounting Standard (IAS) 8 - Accounting Policies, Changes in Accounting Estimates and Errors. Changes in accounting policies which do not give rise to a prior year adjustment are reported in the relevant note. There is the possibility that there may be outcomes within the next financial year that differ from those made this year and consequently these may require a material adjustment to the carrying amount of an affected asset or liability.

1.1 Accounting convention

The accounts have been prepared under the historical cost convention, modified by the revaluation of non-current assets and intangible assets to fair value. New or amended accounting standards that are considered relevant and their anticipated impact on the accounts are as follows:

• IFRS S1 and IFRS S2. Para 5.4.15 of the FReM explains that Scottish Bodies should report in accordance with guidance from the Scottish Government and the Task Force on Climate-related Financial Disclosures (TCFD) requirements have not yet been implemented.
• IFRS 17- Insurance Contracts. IFRS 17 replaces IFRS 4 and establishes a current value approach for measuring insurance contracts, ensuring that income, expenditure, and profit are recognised as insurance services are provided to policyholders (HM Treasury, 2025). Under the IFRS 17 model, insurance contract liabilities will be calculated as the present value of future insurance cash flows with a provision for risk. IFRS 17 as adapted by FReM is effective for financial years starting 1 April 2025, with early adoption permitted. The impact of IFRS 17 on Transport Scotland’s accounts has been determined to be immaterial.
• IFRS 18 will replace IAS 1 Presentation of Financial Statements and is effective for annual reporting periods beginning on or after 1 January 2027 in the private sector. The impact of IFRS 18 on the Public Sector is still being assessed, and a decision has not yet been taken on an implementation date.

1.2 Trunkings / de-trunkings

Transport Scotland’s accounts reflect the trunk road network that Scottish Ministers have ownership of and responsibility to maintain. Transfers of the responsibility for maintaining sections of the trunk road network to / from the local authority network are referred to as ‘de-trunkings’ or ‘trunkings’ respectively and are treated as transfers to / from other government departments at nil consideration through the general fund.

1.3 Property, plant, and equipment

All property, plant and equipment assets will be accounted for as non-current assets unless they are deemed to be held for sale. Title to the freehold land and buildings shown in the accounts of Transport Scotland is held by Scottish Ministers.

1.4 Capitalisation policy

The trunk road network is recognised as a single infrastructure asset in accordance with FReM. However, it comprises four distinct elements that are accounted for differently: land, road pavement, structures, and communications. Subsequent expenditure is capitalised where it adds to the service potential or replaces the existing elements of assets that were previously identified in the Road Authorities Asset Valuation System (RAAVS). Expenditure that does not replace or enhance service potential will be expensed as a charge to the Statement of Comprehensive Net Expenditure. Where a scheme is subsequently cancelled, the capital costs already incurred are written off to the Statement of Comprehensive Net Expenditure. Any retained land or building assets are transferred to the land and buildings category where it is not currently possible to market them for sale or to Assets Held for Sale where they are being marketed for sale.

Other non-current assets are capitalised where expenditure exceeds the following thresholds:

Land & Buildings - £10,000

Leasehold Improvements - £10,000

Information & Communication Technology (ICT) - £25,000

Plant & Machinery - £5,000

Transport - £5,000

Items falling below these limits are charged as an expense and shown in the Statement of Comprehensive Net Expenditure. Furniture and fittings are not capitalised unless part of a specially identified project, such as a major relocation exercise.

Valuation

Land is held at current market values, as assessed by the Valuation Office Agency (VOA). Revaluation exercises are carried out on buildings and dwellings as part of the Scottish Government five-year rolling programme, with indexation applied in the intervening years.

Other items of property, plant and equipment are held at current value in existing use. These assets have not been re-valued from their depreciated historic cost or valuation at 1 April 2007, as the movement in their relevant indices since then was considered to be negligible and the economic lives of the assets so short that the impact of any adjustment was not considered significant.

Infrastructure assets – the trunk road network

The Scottish trunk road network is a specialised infrastructure asset with no active market and no income-generating capability. In accordance with the Financial Reporting Manual (FReM) and IFRS 13 Fair Value Measurement, the network is valued using the Depreciated Replacement Cost (DRC) methodology based on service potential. Land is valued separately using rates supplied by the Valuation Office Agency (VOA).

Transport Scotland undertakes a full valuation of the trunk road network at the end of each financial year. The valuation covers the principal asset categories of roads, structures, communications technology and land, and is supported by professional cost estimators and specialists in valuation, modelling and statistics.

The DRC methodology estimates the current value of an asset by taking its Gross Replacement Cost (GRC), being the cost of replacing the asset with a modern equivalent, and adjusting it to reflect the asset's current condition, age and consumption of economic benefits or service potential.

Table 1 Valuation Methodology

1.  Trunk Road Network Asset Characterisation and Quantification
2.  Calculate Gross Replacement Cost (GRC)
3.  Apply Depreciation and calculate Depreciated Replacement Cost (DRC)

Valuations are not based on the historic actual cost of construction for individual elements of the trunk road network. Instead, the trunk road network is valued using standard unit costing rates for each asset type, applied on a modern-equivalent asset basis. These rates are derived from the best evidence available on the actual cost of recent comparable schemes by Transport Scotland. To ensure valuations remain current and reflective of current price levels, historic unit costings applied are updated yearly through the application of indexation. 

The road pavement, structures and communications assets are valued using agreed rates determined to identify the gross replacement cost of applicable types of road, structure or communications on the basis of new construction on a greenfield site. These rates are updated annually using indices to reflect current prices and are also updated when new construction costs become available as comparators to the costs previously identified for specific road types. However, special structures, which tend to be one off by their nature, are valued using specific costs that are updated to current prices. 

The indexation factors applied are as follows: 

For Road Pavement, Structures and Communications rates are uplifted using the Price Adjustment Formulae Indices published by Building Cost Information Service (BCIS). Transport Scotland has a bespoke model for re-basing these rates which combines fourteen individual indices to produce a single Baxter figure used for uplifts on a quarterly basis. The weightings used in this model are regularly reviewed by professional advisors and are deemed to be still representative of current construction practices.

Land - Land indices produced by Valuation Office Agency

Updated Land rates are provided on an annual basis by the Valuation Office Agency.

Upwards revaluation movements are added to the revaluation reserve. Downward movements in value are off set against any credit balance held in the revaluation reserve until the credit is exhausted and thereafter expensed in the Statement of Comprehensive Net Expenditure.

The values reported in the 2024-25 Annual Accounts reflected the average provisional Baxter Index for January, February and March 2025 of 3091.55. The values in the 2025-26 annual accounts reflect the average January, February and March 2026 Baxter Index of 3197.19 which is an increase of 3.41%. These were the latest index values available at the valuation date.

Transport Scotland also makes an annual adjustment to the revaluation reserve to align values in our accounting system with those held within RAAVS. This adjustment reflects differences between the actual costs recorded for assets under construction in the accounting system and the standard unit rates used to value assets added to the network within RAAVS.

Where Quarter 4 Baxter data becomes available after the valuation date, Transport Scotland assess the impact on the valuation of the trunk road network. No adjustment is made where the impact is assessed as immaterial to the financial statements. Where the impact is considered material, the valuation is updated accordingly.

Historic valuation adjustments arising from immaterial corrections to prior year measurements and valuations of the road network are disclosed separately in the Statement of Changes in Taxpayers’ Equity and Property Plant and Equipment note and not treated as prior year adjustments. 

Assets under construction

Road building schemes in the course of construction are capitalised at actual cost with no indexation. Assets under construction are not depreciated.

Land and buildings

Land and buildings released from road schemes deemed surplus to requirements are transferred to, and accounted for as, Assets Held for Sale.

Information technology

Information technology assets are stated at historical cost with no indexation applied.

1.5 Depreciation

Infrastructure assets

The road network is surveyed over a five-year rolling period to assess the estimated remaining useful lives, and the resultant assessment is used to determine their valuation, with any changes reflected as a condition variance. The variance is valued according to the rates applied to the respective sections of road. The useful economic lives of elements of the road valuation are assessed according to the following design lives:

	Life in years
Road surface, sub-pavement layer, fencing, drainage, and lighting	20
Road bridges, tunnels, and underpasses	20 to 120
Culverts, retaining walls and gantries	20 to 120
Road communications assets	15 to 50

The annual depreciation charge for the road surface is made up of two components:

1. Capitalised Maintenance Depreciation. The valuation of the road network is calculated based upon condition surveys. Capitalised Maintenance schemes are performed to ensure that the condition of the road network is maintained at a steady state. Capitalised Maintenance schemes are not treated for accounting purposes as having an impact on the valuation of the road network because any related improvement in road condition will be reflected within the surveys. On this basis, we depreciate 100% of Capitalised Maintenance expenditure in the year that it is incurred and account for the charge in net expenditure.
2. Condition Depreciation. The annual condition depreciation charge for the road surface is determined by the annual condition variance. This information is provided by AtkinsRealis and is based on output from the condition surveys carried out within the financial year.

Structures and communications assets are depreciated on a straight-line basis relative to their remaining life and any renewals over the period.

Non-infrastructure assets

With the exception of surplus land and properties awaiting sale, non-infrastructure assets are depreciated on a straight-line basis over the expected life of the particular asset category as follows:

	Life in years
Freehold buildings	5 to 100
Leasehold buildings	Shorter of length of lease or specific asset life
IT Equipment	3 to 10
Plant and Machinery	5

Right of use assets and leases

For government bodies reporting under the FReM, IFRS 16 Leases was implemented from 1 April 2022; this introduced a single lessee accounting model that requires a lessee to recognise assets and liabilities for all leases (apart from the exemptions included below) and replaces IAS 17 Leases. In accordance with IFRS 16, contracts, or parts of a contract that convey the right to use an asset in exchange for consideration are accounted for as leases, including peppercorn leases. The FReM expands the scope of IFRS 16 to include arrangements with nil consideration. The standard also applies to arrangements with other public sector organisations which share accommodation, often through MOTO (Memorandum of Terms of Occupation) agreements.

Contracts for services are evaluated to determine whether they convey the right to control the use of an identified asset, as represented by rights both to obtain substantially all the economic benefits from that asset and to direct its use. In such cases, the relevant part is treated as a lease.

Contracts for low-value items, in line with the capitalisation levels for property, plant and equipment noted above in Note 1.4, provided they are not highly dependent on or integrated with other items; and contracts with a term shorter than twelve months are excluded.

At the commencement of a lease (or the IFRS 16 transition date, if later), a right-of-use asset and a lease liability are recognised. The lease liability is measured at the present value of the payments for the remaining lease term, net of irrecoverable value added tax, discounted either by the rate implicit in the lease, or, where this cannot be determined, the rate advised by HM Treasury for that calendar year. The liability includes payments that are fixed, or in-substance fixed, excluding, for example, changes arising from future rent reviews or changes in an index. The right-of-use asset is measured at the value of the liability, adjusted for any payments made or amounts accrued before the commencement date; lease incentives received; incremental costs of obtaining the lease; and any costs related to restoration at the end of the lease. However, for peppercorn or nil consideration leases, the asset is measured at its existing use value.

The asset is subsequently measured using the fair value model. The cost model is considered to be a reasonable proxy except for leases of land and property without regular rent reviews. For these leases, the asset is carried at a revalued amount. In these financial statements, right-of-use assets held under index-linked leases have been adjusted for changes in the relevant index, while assets held under peppercorn or nil consideration have been valued using market prices or rentals for equivalent land and properties. The liability is adjusted for the accrual of interest, repayments, and reassessments and modifications. These are measured by re-discounting the revised cash flows.

Expenditure includes interest, straight-line depreciation, any asset impairments, and changes in variable lease payments not included in the measurement of the liability during the period in which the triggering event occurred. Lease payments are debited against the liability. Rental payments for leases of low-value items or shorter than twelve months are expensed.

When acting as a lessor, a determination is made at lease inception whether each lease is a finance or operating lease. To classify each lease, an overall assessment is made on whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease, if not then it is an operating lease.

When acting as an intermediate lessor, its interest in the head lease and the sublease is accounted for separately. Lease payments under operating leases are recognised as income on a straight-line basis over the length of the lease terms. Where a sublease is classified as a finance lease, the right-of-use asset relating to the subleased portion of the head lease is derecognised and a net investment in the sublease is recognised in the Statement of Financial Position. A lease receivable for the sublease, and any gains or losses on the lease receivable, is recognised in the Statement of Financial Position.

1.7 Intangible non-current assets

Intangible non-current assets are capitalised where expenditure of £25,000 or more is incurred in acquiring them. In accordance with the FReM, Intangible assets are accounted for in line with the requirements of IAS 38 Intangible Assets and are valued at depreciated replacement cost. Revaluations are carried out according to IAS 38 for assets over a valuation threshold.

Future economic benefit has been used as the criteria in assessing whether an intangible asset meets the definition and recognition criteria of IAS 38 Intangible Assets for assets that do not generate income. IAS 38 defines future economic benefit as, “revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the entity. Intangible assets other than assets under development are amortised on a straight-line basis over their estimated useful lives.” Impairment reviews are carried out if there are any indicators that impairment should be considered. Intangible assets under development are not amortised.

1.8 Financial assets

Loans, trade receivables and accrued income are accounted for in accordance with IFRS 9 Financial Instruments. These financial assets were previously categorised as loans and receivables under IAS 39 Financial Instruments: Recognition and Measurement and have been categorised as financial assets held at amortised cost under IFRS 9.

Loans and receivables are recognised initially at fair value, plus transaction costs. Fair value is usually the contractual value of the transaction. Thereafter, loans and receivables are held at amortised cost in accordance with IFRS 9 where the agency’s business model is to hold them to collect the cash flows and where the cash flows are solely payments of principal and interest on the outstanding principal.

Where material and not specifically excluded by the FReM, credit loss allowances are recognised. Credit loss allowances for trade receivables and similar arrangements are measured at the lifetime expected credit loss. Credit loss allowances for formal loans are measured at the twelve-month expected credit loss where the credit risk on the loan has not increased significantly since initial recognition. We have provided for anticipated credit losses in respect of those loans where there is evidence to indicate that we may not be able to recover the full value of their amortised cost and deducted these values from the carrying amounts as required under IFRS 9.

Loans and receivables are only derecognised under the following circumstances:

• when the rights to the cash flows expire.
• when the assets have been transferred; or
• when the assets have been written off because there is no reasonable expectation of recovering them.

1.9 Investment in equities

Investments in entities that are not classified to central government are financial instruments within the scope of IFRS 9. They are all classified as equity instruments measured at fair value through other comprehensive income.

As all financial assets previously classified as available-for-sale under IAS 39 have transitioned to equity instruments measured at fair value through other comprehensive income. Measurement at fair value may require the use of accounting estimates and so may give rise to estimation uncertainty.

In valuing instruments for which there is no active market, we have used estimation techniques which reflect, as far as practicable, those that would be used by market participants, making maximum use of observable inputs. Shares held in public sector bodies are valued at historic cost (less transaction costs) in the absence of an active market where fair value cannot be reliably measured. 

Shareholdings are de-recognised when the agency’s rights to receive cash flows expire or have been transferred, provided that the transfer transaction also transfers substantially all of the risks and rewards of ownership and control of the financial asset.

1.10 Trade and other payables

These are financial liabilities other than those classified as held at fair value through profit and loss and those classified as financial guarantee contracts.

They are valued at fair value, with the transaction value regarded as the fair value at the date of initial recognition. Thereafter, where the time value of money is considered to be material, they are held at amortised cost using the effective interest rate to discount future cash flows. They are derecognised when all obligations are settled.

1.11 Service concession arrangements

Private finance transactions are accounted for in accordance with IFRIC 12, Service Concession Arrangements which sets out how these transactions are to be accounted for. We have five such arrangements, three Private Finance Initiative (PFI) schemes and two Non-Profit Distributing (NPD) schemes (see Note 16 for more details). The private sector operator is contractually obliged to provide the services related to the infrastructure that they construct, which is recognised as a non-current asset. The asset is measured by using the fair value approach. The fair value of the asset determines the amount to be recorded as an asset with an offsetting liability. The total unitary payment is then divided into three: the service charge element, repayment of the capital element of the contract obligation and the interest expense on it (using the interest rate implicit in the contract).

1.12 Provisions

Legal and constructive obligations that are of uncertain timing or amount are provided for in the Statement of Financial Position at 31 March on the basis of the best estimate available. These are accounted for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Provisions are charged to the Statement of Comprehensive Net Expenditure unless they are capitalised as part of additions to non-current assets. Major projects provisions relate to compensation claims made in respect of work done under the projects that have not yet been fully settled.

1.13 Other infrastructure expenditure

Other infrastructure expenditure is differentiated between capital and resource for budgeting purposes. However, only the expenditure that is capital in nature that relates to assets reflected in these accounts is capitalised. Expenditure that relates to assets reflected by external bodies is charged as expenditure.

1.14 Operating income

Operating income relates to operating activities and principally comprises fees and charges for services provided on a full-cost basis to external customers in both the public and private sectors. It includes not only income retained but also income due to the Scottish Government Consolidated Fund. Operating income is stated net of VAT.

1.15 Administration and programme expenditure

The Statement of Comprehensive Net Expenditure is analysed between administration and programme costs. Administration costs reflect the costs of running the agency and include staff costs as well as accommodation, services, and supplies. Programme costs reflect the costs of operating, maintaining, managing, and improving the road, rail, aviation, and maritime infrastructure for which we have responsibility as well as those incurred in delivering transport policies, such as concessionary fares, and grants and subsidies to contribute to the provision of rail, bus, ferry, and air services. The allocation of costs between administration and support of the programme work is reviewed in year and can result in reallocation of staff costs and a consequential reduction in expenditure classed as administration.

1.16 Grants payable

Grants payable are recorded as expenditure in the period that the underlying activity giving entitlement to the grant occurs. Where necessary, obligations in respect of grant schemes are recognised as liabilities.

1.17 Pensions

Past and present employees are mainly covered by the provisions of the Principal Civil Service Pension Scheme (PCSPS) and the Civil Servants and Others Pension Scheme or Alpha Scheme, more details of which can be found in Note 2. The PCSPS is an unfunded multi-employer defined benefit scheme. Transport Scotland’s contributions are recognised as a cost in the year. The Alpha Scheme provides benefits on a career average basis with a normal pension age equal to the member’s State Pension Age (or sixty-five if higher).

1.18 Contingent liabilities

Contingent liabilities include those required to be disclosed under IAS 37 Provisions, Contingent Liabilities and Contingent Assets and other liabilities arising from indemnities and guarantees (which are not financial guarantee contracts) included for parliamentary reporting and accountability. They are disclosed in respect of:

• possible obligations arising from past events whose existence will be confirmed by the occurrence of uncertain future events out with Transport Scotland’s control; or
• present obligations arising from past events where it is not likely that resources will be required to settle the obligation, or it is not possible to measure it reliably.

1.19 Value added tax (VAT)

Transport Scotland accounts for VAT in accordance with HMRC and Scottish Government guidance. Amounts reported in the Statement of Comprehensive Net Expenditure are stated net of recoverable VAT and include irrecoverable VAT where applicable. Recoverable VAT is recognised as a receivable, and VAT payable is recognised as a liability in the Statement of Financial Position.

VAT balances are measured based on amounts expected to be recovered from, or paid to, HMRC at the reporting date.

1.20 Segmental reporting

IFRS 8 Segmental Reporting requires operating segments to be identified on the basis of internal reports about components. Transport Scotland identifies components of expenditure which are regularly reviewed by the Senior Management Team in order to manage financial performance.

1.21 Employee benefits

A short-term liability and expense is recognised for holiday days, holiday pay, bonuses, and other short-term benefits when employees render service that increases their entitlement to these benefits. As a result, an accrual has been made for leave earned but not taken.

1.22 Critical accounting estimates

Critical accounting estimates are used in determining the valuation of certain assets and liabilities included in the annual accounts. Significant estimates have been outlined below:

Valuation of the Trunk Road Network

The valuation of the Scottish trunk road network is sensitive to movements in key assumptions used in determining the Depreciated Replacement Cost (DRC). Given the size and complexity of the network, relatively small changes in certain valuation inputs could potentially result in material movements in the carrying value reported in the Statement of Financial Position.

This valuation reflects assumptions, estimates and professional judgement that are incorporated in the data input to the model used to produce the valuation known as the Road Authorities Asset Valuation System (RAAVS). This model is currently provided by AtkinsRealis through a joint contract with the other UK Road Authorities to ensure that the valuation methodology follows best practice and is FReM compliant. The valuation contains multiple areas of judgement and estimation uncertainty due to the inherent complexity of the data required to inform the Roads network valuation methodology.

The most significant sensitivities are outlined below:

Unit Rates and Construction Cost Indexation

The Gross Replacement Cost is sensitive to changes in the standard unit rates applied to asset quantities and to the construction cost indices used to uplift those rates to current prices. An increase or decrease in assumed unit rates, or in the indexation factors applied, would result in a corresponding change in the Gross Replacement Cost and therefore the DRC of the network.

Transport Scotland aims to refresh the unit rates used in trunk road valuations whenever a suitable, representative scheme is completed, as this allows actual outturn costs to be incorporated into the valuation process. In recent years, however, few schemes have met the criteria required to provide reliable and transferable cost data. As appropriate benchmark projects have not been constructed since 2011/12, since Transport Scotland are dualling and not building new roads on greenfield sites existing unit costs for roads, structures and communications assets have instead been uplifted (indexed) using recognised cost indexation methods (Baxter indices) to reflect inflation and construction market trends until new representative scheme data becomes available.

The Baxter index is a composite civil engineering cost index produced by the Building Cost Information Service (BCIS). It draws on a weighted mix of labour, materials and plant indices relevant to highway construction and is updated throughout the year. It is designed to model inflationary changes in the cost of delivering civil engineering works and is widely used across UK public-sector road authorities

The Indices used for the valuation at 31 March 2026 are the average of January, February and March 2026 provisional figures run on 30 April 2026 with the latest data available indices for the respective 3 months. The valuation is sensitive to these indices, and a 2% movement would result in a material movement of £520 million. The below table shows the monthly movement to the Indices applied.

Asset Lives and Remaining Useful Life

The valuation is sensitive to assumptions relating to nominal asset lives, remaining useful lives and minimum remaining life parameters. Changes to these assumptions directly affect depreciation factors applied in the DRC methodology and could give rise to material changes in the reported value of the network. Asset life assumptions are reviewed periodically and are based on engineering assessments, historic performance data and industry benchmarks to ensure they remain accurate.

Asset Inventory Data

Variations in recorded asset quantities, dimensions or classifications arising from data updates, improved measurement techniques or reclassification can affect the calculated Gross Replacement Cost. Such changes may result in valuation movements that are not linked to physical enhancement or deterioration of the network.

To ensure reliability of inventory inputs, Transport Scotland operates an annual exception reporting process, supported by its valuation advisers, to identify and investigate anomalies or unexpected movements compared with the prior year data set. Identified differences are reviewed to assess whether they represent valid changes.

Application of Uplifts

The valuation is sensitive to assumptions underlying uplifts for planning and supervision costs, VAT, and (in the case of land) compensation and legal costs. Changes to these assumptions would impact the Gross Replacement Cost.

The following uplifts are applied to ensure that unit costs represent a true reflection of the cost of constructing a modern equivalent asset.

These uplifts are reviewed and updated as required to ensure the valuation reflects current replacement cost assumptions.

While the valuation is sensitive to movements in key inputs, Transport Scotland mitigates this estimation uncertainty through:

• annual re‑performance of valuations using a consistent methodology and re-running comparators for any material changes to assumptions where feasible.
• independent professional oversight of unit rates and indexation models.
• exception reporting and validation of inventory changes against prior‑year data sets.

Recognition and the valuation of provisions

Due to the long-term nature of our road improvement schemes, certain assumptions and judgements are required to be made for the estimated cost of land acquisition and compensation claims. This is due to the often-protracted negotiation periods involved and the initial uncertainty over both the financial value and the final payment date of any compensation.

Valuation of accruals

Due to the timing and availability of final year-end information from external suppliers for concessionary travel, rail and roads maintenance, certain assumptions and judgements are required to be made when determining final accruals.

Note 2 – Staff costs

The costs of staff employed on the design, procurement and management of capital projects undertaken by Transport Scotland have been charged to capital expenditure in respect of the projects identified in the year. These have been identified in the table below with prior year figures to reflect costs similarly capitalised in that year. These costs are included with the project costs in Note 4.

Permanent employed staff are civil servants who have an employment contract with Transport Scotland, others are agency staff.

Wages and salaries include gross salaries, performance pay, or bonuses received in year, overtime, recruitment and retention allowances, private office allowances, ex-gratia payments and any other allowances to the extent that it is subject to UK taxation. The payment of legitimate expenses is not part of salary. Staff costs comprise:

	2025-26 Permanently Employed Staff	Others	Total	2024-25 Permanently Employed Staff	Others	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Administration:
Wages and salaries costs	14,172	427	14,599	12,827	354	13,181
Social Security costs	1,760	-	1,760	1,460	-	1,460
Other Pension costs	3,696	-	3,696	3,495	-	3,495
Early retirement costs	-		-	-		-
	19,628	427	20,055	17,782	354	18,136
Programme:
Wages and salaries costs	15,981	482	16,463	14,275	394	14,669
Social Security costs	1,985	-	1,985	1,625	-	1,625
Other Pension costs	4,168	-	4,168	3,890	-	3,890
Early retirement costs	-		-	-		-
	22,134	482	22,616	19,790	394	20,184
Total staff costs to be charged to statement of comprehensive net expenditure	41,762	909	42,671	37,572	748	38,320
Capitalised Programme:
Wages and salaries costs	3,811	156	3,967	3,149	300	3,448
Social Security costs	521		521	360		360
Other Pension costs	1,081		1,081	900		900
Running costs	288		288	-		-
	5,701	156	5,857	4,409	300	4,708
Total staff costs charged to capital expenditure	5,701	156	5,857	4,409	300	4,708
Total staff costs	47,463	1,065	48,528	41,980	1,048	43,028

Pension costs

The Principal Civil Service Pension Scheme (PCSPS) is an unfunded multi-employer defined benefit scheme and as a result, Transport Scotland is unable to identify its share of the underlying liabilities. The scheme is therefore accounted for as a defined contribution scheme. The Government Actuary’s Department valued the scheme liabilities at 31 March 2024. Details can be found in the resource accounts of the Cabinet Office.

Pension benefits are provided through the Civil Service pension arrangements. From 1 April 2015 a new pension scheme for civil servants was introduced – the Civil Servants and Others Pension Scheme or Alpha, which provides benefits on a career average basis with a normal pension age equal to the member’s State Pension Age (or 65 if higher). From that date, all newly appointed civil servants and the majority of those already in service joined Alpha. Prior to that date, civil servants participated in the Principal Civil Service Pension Scheme (PCSPS). The PCSPS has four sections: three providing benefits on a final salary basis (Classic, Premium, or Classic Plus) with a normal pension age of sixty; and one providing benefits on a whole career basis (Nuvos) with a normal pension age of sixty-five.

These statutory arrangements are unfunded with the cost of benefits met by monies voted by Parliament each year. Pensions payable under Classic, Premium, ClassicPlus, Nuvos and Alpha are increased annually in line with Pensions Increase legislation. Existing members of the PCSPS who were within 10 years of their normal pension age on 1 April 2012 remained in the PCSPS after 1 April 2015. Those who were between 10 years and 13 years and 5 months from their normal pension age on 1 April 2012 switched to Alpha between 1 June 2015 and 1 February 2022.

All members who switch to Alpha have their PCSPS benefits ‘banked,’ with those with earlier benefits in one of the final salary sections of the PCSPS having those benefits based on their final salary when they leave Alpha. (The pension figures quoted for officials show pension earned in PCSPS or Alpha – as appropriate. Where the official has benefits in both the PCSPS and Alpha, the figure quoted is the combined value of their benefits in the two schemes.) Members joining from October 2002 may opt for either the appropriate defined benefit arrangement or a ‘money purchase’ stakeholder pension with an employer contribution (partnership pension account).

Employee contributions are salary-related and range between 4.6% and 8.05% for members of Classic, Premium, Classic Plus, Nuvos and Alpha. Benefits in Classic accrue at the rate of 1/80th of final pensionable earnings for each year of service. In addition, a lump sum equivalent to three years initial pension is payable on retirement. For Premium, benefits accrue at the rate of 1/60th of final pensionable earnings for each year of service. Unlike Classic, there is no automatic lump sum. ClassicPlus is essentially a hybrid with benefits for service before 1 October 2002 calculated broadly as per Classic and benefits for service from October 2002 worked out as in premium. In Nuvos, a member builds up a pension based on their pensionable earnings during their period of scheme membership.

At the end of the Alpha scheme year (31 March) the member’s earned pension account is credited with 2.32% of their pensionable earnings in that scheme year and the accrued pension is uprated in line with Pensions Increase legislation. Benefits in Alpha build up in a similar way to Nuvos, except that the accrual rate is 2.32%. In all cases, members may opt to give up (commute) pension for a lump sum up to the limits set by the Finance Act 2004.

The partnership pension account is a stakeholder pension arrangement. The employer makes a basic contribution of between 8% and 14.75% (depending on the age of the member) into a stakeholder pension product chosen by the employee from a panel of providers. The employee does not have to contribute, but where they do make contributions, the employer will match these up to a limit of 3% of pensionable salary (in addition to the employer’s basic contribution).

Employers also contribute a further 0.5% of pensionable salary to cover the cost of centrally provided risk benefit cover (death in service and ill health retirement).

The accrued pension quoted is the pension the member is entitled to receive when they reach pension age, or immediately on ceasing to be an active member of the scheme if they are already at or over pension age. Pension age is sixty for members of Classic, Premium, and Classic Plus, sixty-five for members of Nuvos, and the higher of sixty-five or State Pension Age for members of Alpha. (The pension figures quoted for officials show pension earned in PCSPS or Alpha, as appropriate. Where the official has benefits in both the PCSPS and Alpha the figure quoted is the combined value of their benefits in the two schemes but note that part of that pension may be payable from different ages.). Further details about the Civil Service pension arrangements can be found at the website www.civilservicepensionscheme.org.uk.

New career average pension arrangements were introduced on 1 April 2015 and the majority of Classic, Premium, Classic Plus and Nuvos members joined the new scheme. Further details of this new scheme are available at Civil Superannuation annual account 2024 to 2025 (HTML) - GOV.UK.

For 2025-26, employers’ contributions of £8.9 million (2024-25, £8.3 million) were payable to the PCSPS at a rate of 28.97% (2024-25, 28.97%). The scheme Actuary reviews employer contributions every four years following a full scheme valuation. The contribution rates are set to meet the cost of the benefits accruing during 2025-26 to be paid when the member retires, and not the benefits paid during this period to existing pensioners.

Note 3 - Other Administration Costs

	Note	2025-26	2024-25
		£'000	£'000
Rentals under operating leases		18	19
Accommodation		1,669	(146)
Office costs and supplies		2,015	1,618
Hospitality		21	12
Travel		128	151
Training		71	49
Consultancy		137	285
Non-cash items		-	-
Depreciation	6/7	998	1,620
Auditors’ remuneration expenses - external	22	215	206
Other operating costs		(934)	-
Total administration costs		4,338	3,814

From 1 April 2025 Transport Scotland de-recognised the right of use asset relating to the sub-lease of the 4th Floor of its office accommodation in Bothwell Street. In accordance with IFRS 16 Leases, this resulted in a gain on de-recognition of £934k, which has been recognised as a gain under Other Operating Costs in the Statement of Comprehensive Net Expenditure.

Note 4 – Programme costs

		2025-26	2024-25
	Note	£'000	£'000
Other programme expenditure
Roads
Capital maintenance		276,187	215,392
Current maintenance		217,039	183,709
PFI interest charges		72,230	73,517
PFI service charges		36,518	29,424
Rail
Scottish Rail Holdings *		841,321	818,572
Rail infrastructure in Scotland **		461,740	465,133
Other		864	480
Concessionary travel
Smartcard applications		1,223	3,181
Concessionary travel schemes		425,823	397,542
Other public transport
Major public transport projects - rail ***		158,033	178,934
Transport information		546	370
Ferry services in Scotland		360,373	334,421
Air services in Scotland		66,036	75,045
Bus services in Scotland		52,343	44,142
Other transport directorate programmes		55,198	45,742
Low Carbon and Active Travel		150,211	157,919
Central Government grants to Local Authorities		12,400	41,763
Resource AME Transactions (EST Loans Only)		7,503	(10,725)
Non-cash items
Depreciation	6/7	288,072	82,388
Total other programme costs		3,483,660	3,136,949

* Cash Grant in Aid Payments to Scottish Rail Holdings totalling £841 million
** Rail Infrastructure in Scotland Payment of £462m was paid directly to 'Network Rail'
*** Enhancement grant of £149m was paid directly to Network Rail and is disclosed in the 'Major public transport projects - rail' line

Note 5 - Operating income

• Operating income principally arises from:
• Interest receivable from loans to Caledonian Maritime Assets Limited.
• Rental income from land and properties acquired for road schemes and now surplus to requirements.
• Sale of land and property which is surplus to the requirements of the road or rail scheme.
• Other income including re-imbursement from local authorities for work done and one-off income from Abellio

	2025-26	2024-25
Programme Income	£'000	£'000
Interest Receivable - loans	(16,568)	(12,082)
Rental Income - Land and Properties	(56)	(60)
Other income	(16,719)	-
European Structural Fund (ESF) income	-	(101)
Total operating income	(33,343)	(12,243)

Note 6 - Property, plant, and equipment

Transfers and reclassifications include roads and associated land and buildings, which have transferred from Local Authority control as a result of the trunking of those particular sections of the road network. There are some adjustments which reflect the transfer of road assets to local authority control (de-trunking), with the corresponding entry flowing through the general fund.

AtkinsRealis (RICS Regulated) carry out an annual valuation of the trunk road network. Revaluation is based on Baxter’s indexation for all road network assets with the exception of land. Land is valued at market rates based on information supplied by the VOA. All revaluation movements are reflected in the revaluation reserve.

2025-26	Road Network	Land	Buildings	Transport	Leasehold Improvements	Assets under Construction	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Cost or Valuation
At 1 April 2025	33,489,071	6,198	8,959	135	2,755	545,499	34,052,617
De-trunkings	-	-	-	-			-
Additions	131,069	-	-	-	687	146,203	277,959
Disposals	-	-	-	-	-	-	-
Revaluation	1,019,085	-	-	-	-	-	1,019,085
Historic valuation adjustments	23,111	-	-	-	-	-	23,111
Balance at 31 March 2026	34,662,336	6,198	8,959	135	3,442	691,702	35,372,772
Depreciation
At 1 April 2025	6,294,645	-	2,735	135	-	-	6,297,515
De-trunkings		-		-	-	-	-
Charge for the year	287,605	-	467	-	-	-	288,072
Disposals	-	-	-	-	-	-	-
Revaluation	58,754	-	-	-	-	-	58,754
Historic valuation adjustments	10,901	-	-	-	-	-	10,901
Transfers and reclassifications	-	-	-	-	-	-	-
Balance at 31 March 2026	6,651,905	-	3,202	135	-	-	6,655,242
Net Book Value at 31 March 2026	28,010,431	6,198	5,757	-	3,442	691,702	28,717,530
Net Book Value at 31 March 2025	27,194,426	6,198	6,224	-	2,755	545,499	27,755,102
Asset Financing
Owned	23,990,573	6,198	5,757	-	3,442	691,702	24,697,672
On Balance Sheet PFI	4,019,858	-	-	-	-	-	4,019,858
Net Book Value at 31 March 2026	28,010,431	6,198	5,757	-	3,442	691,702	28,717,530

2024-25	Road Network	Land	Buildings	Transport	Leasehold Improvements	Assets under Construction	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Cost or Valuation
At 1 April 2024	33,854,756	6,198	8,959	135	-	515,875	34,385,923
De-trunkings	-	-	-	-			-
Additions	144,057	-	-	-	2,755	68,975	215,787
Disposals	-	-	-	-	-	-	-
Revaluation	(383,351)	-	-	-	-	-	(383,351)
Historic valuation adjustments	(165,742)	-	-	-	-	-	(165,742)
Transfers and reclassifications	-	-	-	-	-	-	-
Transfers (to)/from assets under construction	39,351	-	-	-	-	(39,351)	-
Balance at 31 March 2025	33,489,071	6,198	8,959	135	2,755	545,499	34,052,617
Depreciation
At 1 April 2024	6,431,233	-	2,256	135	-	-	6,433,624
De-trunkings		-		-	-	-	-
Charge for the year	81,909	-	479	-	-	-	82,388
Disposals		-	-	-	-	-	-
Revaluation	(186,935)	-	-	-	-	-	(186,935)
Historic valuation adjustments	(31,562)	-	-	-	-	-	(31,562)
Transfers and reclassifications		-	-	-	-	-	-
Balance at 31 March 2025	6,294,645	-	2,735	135	-	-	6,297,515
Net Book Value at 31 March 2025	27,194,426	6,198	6,224	-	2,755	545,499	27,755,102
Net Book Value at 31 March 2024	27,423,523	6,198	6,703	-	-	515,875	27,952,298
Asset Financing
Owned	23,309,040	6,198	6,224	-	2,755	542,872	23,867,089
On Balance Sheet PFI	3,885,386	-	-	-	-	2,627	3,888,013
Net Book Value at 31 March 2025	27,194,426	6,198	6,224	-	2,755	545,499	27,755,102

Note 7a – Right of use assets

	2025-26
	Total
	£'000
Cost or Valuation Balance as at 1 April 2025	30,639
Additions	-
Disposals	(14,355)
At 31 March 2026	16,284
Depreciation Balance as at 1 April 2025	3,672
Charged in year	1,001
Disposals	(1,388)
At 31 March 2026	3,285
Net Book Value	12,999
Analysis of asset financing:
Owned
Finance-Leased	12,999
Net book value	12,999

 

	2024-25
	Total
	£'000
Cost or Valuation Balance as at 1 April 2024	30,639
Additions	-
Disposals	-
At 31 March 2025	30,639
Depreciation Balance as at 1 April 2024	2,053
Charged in year	1,619
Disposals	-
At 31 March 2025	3,672
Net Book Value	26,967
Analysis of asset financing:
Owned
Finance-Leased	26,967
Net book value	26,967

Note 7b - Lease Liabilities

7b Lease Liabilities	As at	As at
	31 March 2026	31 March 2025
	£'000	£'000
Within one year	558	1,281
Between 2 and 5 years	2,284	5,126
After 5 years	24,315	25,905
Less accrued interest	(3,201)	(3,461)
Total	23,956	28,851

Note 8 – Intangible assets

Purchased computer software licences are capitalised as intangible non-current assets where expenditure of £25,000 or more is incurred. Intangible assets other than assets under development are amortised on a straight-line basis over their estimated useful lives. Impairment reviews are carried out if there are any indicators that impairment should be considered. Intangible assets under development are not amortised. The remaining carrying value of computer software licences was fully impaired and written off during 2024-25. There were no new intangible assets recognised in 2025-26.

	2025-26	2024-25
	£'000	£'000
At replacement cost or valuation
At 1 April	-	69
Additions
Disposals	-	(69)
Balance as at 31 March	-	-
Accumulated amortisation	-
At 1 April	-	-
Charge for the year	-	-
Revaluations	-	-
Disposals	-	-
Balance at 31 March	-	-
Net book value at 31 March	-	-

Note 9 – Financial assets

Investments in entities that are not classified to central government are financial instruments within the scope of IFRS 9 Financial Instruments.

As at 31 March 2026, Scottish Ministers, represented by Transport Scotland, are the sole shareholder in Caledonian Maritime Assets Ltd (CMAL), David MacBrayne Ltd (DML), Highlands and Islands Airports Ltd (HIAL) and Scottish Rail Holdings Ltd (SRH).

Scottish Ministers hold the following share investments:

• Caledonian Maritime Assets Ltd - 1,500,000 ordinary shares of £10 each
• David MacBrayne Ltd - 5,500,002 ordinary shares of £1 each
• Highlands and Islands Airports Ltd - 50,000 ordinary shares of £1 each
• Scottish Rail Holdings Ltd - 1 ordinary shares of £1

These organisations are operated and managed independently of the Scottish Government, and do not fall within the Departmental Accounting boundary. The companies all publish an annual report and accounts. The net assets and results of the above bodies are summarised overleaf.

2025-26	Interests in Nationalised Industries & Limited Companies	Voted Loans	Other Funds	Total
	£'000	£'000	£'000	£'000
Balance at 1 April 2025	20,550	361,671	108,843	491,064
Add element reported within current assets
Advances and repayments
Cash advances		101,373	202	101,575
Transfers				0
Repayments		(10,422)	(12,563)	(22,985)
Less
Discounting of EST loans			(6,411)	(6,411)
Write-off of EST Loan			(53)	(53)
Expected credit loss			(1,740)	(1,740)
Effective Interest Receivable		8,415	646	9,061
Balance at 31 March 2026	20,550	461,037	88,924	570,511
Loans repayable within 12 months transferred to current assets	-	13,513	12,311	25,824
Loans repayable after 12 months non current assets	20,550	447,524	76,613	544,687
Balance at 31 March 2026	20,550	461,037	88,924	570,511

 

2024-25	Interests in Nationalised Industries & Limited Companies	Voted Loans	Other Funds	Total
	£'000	£'000	£'000	£'000
Balance at 1 April 2024	20,550	255,882	145,114	421,545
Add element reported within current assets
Advances and repayments
Cash advances	-	108,456	387	108,844
Transfers	-	-	-	-
Repayments	-	(10,144)	(47,438)	(57,582)
Less
Discounting of EST loans	-	-	8,793	8,793
Write-off of Financial Transaction			-
Expected credit loss	-	-	-	-
Effective Interest Receivable		7,478	1,987	9,465
Balance at 31 March 2025	20,550	361,671	108,843	491,064
Loans repayable within 12 months in Current Assets	-	14,239	12,564	26,803
Loans repayable after 12 months transferred to non-current assets	20,550	347,432	96,279	464,261
Balance at 31 March 2025	20,550	361,671	108,843	491,064

	Scottish Rail Holdings Ltd	Highland & Island Airports Ltd	Caledonian Maritime Assets Ltd	David MacBrayne Ltd
	£m	£m	£m	£m
Net assets/(liabilities) as at 31 March 2026	26.7	153.8	183.6	54.0
Turnover	451.2	32.5	11.6	366.7
Profit/(loss) for the financial year	(845.2)	(36.6)	7.6	3.0

Results for SRH, Highland & Island Airports Ltd, Caledonian Maritime Assets Ltd and David MacBrayne are draft and subject to audit with final accounts to be published.

Highlands and Islands Airports Limited (HIAL)

Scottish Ministers are the sole shareholder in HIAL. The company’s purpose is to maintain the safe operation of its airports to support economic and social development in the Highland and Islands. HIAL currently operates 11 airports; 10 in the Highlands and Islands and also Dundee, which it operates via a wholly owned subsidiary company, Dundee Airport Ltd.

Caledonian Maritime Assets Limited (CMAL)

Scottish Ministers are the sole shareholder in Caledonian MacBrayne Ltd, which became known as Caledonian Maritime Assets Ltd (CMAL) following a restructure in 2006, and retained ownership of the vessels and ports, which it leases to the operator of the Clyde & Hebrides Ferry services.

David MacBrayne Limited (DML)

Scottish Ministers are the sole shareholder in David MacBrayne Ltd, which became the holding company for CalMac Ferries Ltd following the restructuring in 2006. CalMac Ferries Ltd provides the Clyde & Hebrides Ferry Services under a subsidised public service contract with Scottish Ministers.

Scottish Rail Holdings Limited (SRH)

Scottish Ministers are the sole shareholder of SRH. SRH is the holding company of ScotRail Trains Limited (SRT), which took over the operation of ScotRail services on 1 April 2022 and Caledonian Sleeper Limited (CSL), which took over the operation of Caledonian Sleeper services on 25 June 2023. SRH is responsible for providing oversight and managing the provision of SRT and CSL rail passenger services under the terms of their Grant Agreements.

Voted Loans

These represent loans that Transport Scotland provides to CMAL for the procurement of new shipping.

Other funds

These represent loans that Transport Scotland provides to the Energy Savings Trust to fund energy efficient transport initiatives and to HIAL to renew and improve commercial airport infrastructure.

In respect of IFRS 12, it should be noted that Scottish Rail Holdings, HIAL and David MacBrayne are classed as Non-Departmental Public Bodies (NDPBs) and are treated in accordance with HM Treasury Consolidated Budgeting Guidance.

Transport Scotland has taken account of these bodies’ forecast expenditure within its budget.

Transport Scotland also sponsors (but does not own) British Waterways Scotland, trading as Scottish Canals, under a framework agreement. British Waterways is a statutory body, is classed as an NDPB, and as such is treated in accordance with the HM Treasury Consolidated Budgeting Guidance.

CMAL is classed as a public corporation.

Note 10 - Trade receivables and other assets

Loans, trade receivables and accrued income are accounted for in accordance with IFRS 9 Financial Instruments. Trade receivables are shown net of a provision for impairment.

10a Analysis by classification	As at 31/03/26	As at 31/03/25
	£'000	£'000
Amounts falling due within one year:
Trade and other receivables
Trade and other receivables	1,770	3,728
VAT	30,886	29,979
Damage claims	1,823	1,876
Prepayments and accrued income	146,785	92,947
	181,264	128,530
Amounts falling due after more than one year:
Prepayments and other receivables	33,622	25,621
	33,622	25,621

10b Intra-Government balances	As at 31/03/26	As at 31/03/25
	£'000	£'000
Amounts falling due within one year:
Intra-Government balances
Other Central Government bodies	169,236	56,353
Local Authorities	278	1,771
Public corporations and trading funds	9,261	85
	178,775	58,209
Balances with bodies external to Government	2,489	70,321
Total receivables	181,264	128,530
Amounts falling due after more than one year:
Intra-Government balances
Other Central Government bodies	33,622	-
Local Authorities	-	-
Public corporations and trading funds	-	-
	33,622	-
Balances with bodies external to Government	-	25,621
Total receivables	33,622	25,621

Note 11 - Trade payables and other liabilities

Trade payables and other liabilities are accounted for in accordance with IFRS 9 Financial Instruments.

11a Analysis by classification	As at 31/03/26	As at 31/03/25
	£'000	£'000
Amounts falling due within one year:
Trade and other payables
Trade payables	14,179	7,609
Accruals	232,777	229,762
Other payables	3,406	2,742
Financial liabilities - IFRS 16 Leases	527	553
Financial liabilities - PFI	43,532	43,187
Deferred income	113	110
	294,534	283,963
Amounts falling due after more than one year:
Other payables	292	292
Financial liabilities - IFRS 16 Leases	26,599	27,157
Financial liabilities - PFI	904,174	947,705
	931,065	975,154

11b Intra-Government balances	As at 31/03/26	As at 31/03/25
	£'000	£'000
Amounts falling due within one year:
Intra-Government balances
Other Central Government bodies	58,054	5,760
Local Authorities & Health Boards	41,960	33,418
Public corporations and trading funds	5,112	40,776
	105,126	79,954
Balances with bodies external to Government	189,408	204,009
Total payables	294,534	283,963
Amounts falling due after more than one year:
Intra-Government balances
Balances with bodies external to Government	931,065	975,154
Total payables	931,065	975,154

Note 12 - Provisions for liabilities and charges

Land and property acquisition

Land and property acquisition provision relates primarily to the estimates made of the likely compensation payable in respect of planning blight, discretionary and compulsory acquisition of property from property owners arising from physical construction of a road or rail scheme. When land is acquired by compulsory purchase, it is often not known when compensation settlements will be made. A provision for the estimated total cost of land acquired is created when it is expected that a General Vesting Declaration (GVD) will be published in the near future. It may take several years from the announcement of a scheme to completion and final settlement of all liabilities. The estimates provided by the VOA are reviewed bi-annually.

Major Projects

Major projects provision relates to compensation claims made in respect of work done on projects that have not yet been fully settled.

Other

Transport Scotland agreed to meet the additional costs of benefits payable to specific employees who retired early until they reach the age of 60, at which point the liability is assumed by the PCSPS. The cost of these benefits is provided in full when the employee retires.

12a Provisions for liabilities and charges	Land and Property Acquisition	Major Projects	Other	Total
2025-26	£'000	£'000	£'000	£'000
Balance as at 1 April 2025	16,893	1,000	1,183	19,076
Provided in year	24,360	157	-	24,517
Provisions not required written back	(1,428)	22	(443)	(1,849)
Provisions utilised in year	(5,872)	(247)	-	(6,119)
Discount amortised	(2,169)	-	-	(2,169)
Balance as at 31 March 2026	31,784	932	740	33,456
2024-25
Balance as at 1 April 2024	11,491	3,558	1,183	16,232
Provided in year	8,472	231	-	8,703
Provisions not required written back	(2,429)	(2,130)	-	(4,559)
Provisions utilised in year	(641)	(659)	-	(1,300)
Discount amortised				-
Balance as at 31 March 2025	16,893	1,000	1,183	19,076

12b Analysis of expected timing of discounted flows	Land and Property Acquisition	Major Projects	Other	Total
	£'000	£'000	£'000	£'000
In the remainder of the period to 2027	9,356	932	-	10,288
Between 2027 and 2030	14,856	-	-	14,856
Between 2030 and 2035	6,973	-	-	6,973
Thereafter	599	-	740	1,399
Balance as at 31 March 2026	31,784	932	740	33,456
In the remainder of the period to 2026	9,128	1,000	-	10,128
Between 2026 and 2029	3,717	-	1,183	4,900
Between 2029 and 2034	4,048	-	-	4,048
Balance as at 31 March 2025	16,893	1,000	1,183	19,076

Note 13 - Movement on working capital balances

		As at 31/03/26	Restated As at 31/03/25	2025-26 Net Movement	2024-25 Net Movement
	Note	£’000	£’000	£’000	£’000
Receivables
Due within one year	10	181,264	128,530	(52,734)	(28,012)
Due after more than one year	10	33,622	25,621	(8,001)	4,379
Net(increase)/decrease		214,886	154,151	(60,735)	(23,633)
Payables
Due within one year	11	294,534	283,963	10,571	(18,845)
Due after more than one year	11	931,065	975,154	(44,090)	(43,739)
		1,225,599	1,259,117	(33,519)	(62,584)
Less: IFRS 16 Liabilities included in above	11	27,126	27,710	(584)	(982)
Less: PFI creditors included in above	11	947,705	990,892	(43,187)	(41,885)
Less: Capital accruals included in the above	11	54,548	66,054	(11,506)	(36,085)
Net increase/(decrease)		196,219	174,461	21,758	16,368
Provisions	12	33,456	19,076	14,380	2,844
Net increase/(decrease)		33,456	19,076	14,380	2,844
Net movement increase/(decrease)		444,561	347,688	(24,597)	(4,421)

Note 14 - Capital commitments

Transport Scotland’s capital commitments relate to future payments on major road schemes currently under construction and capital infrastructure contracts. The contracts have been awarded and the loans agreed. These commitments have not been reflected elsewhere in the accounts.

	Value of Commitment Payable
Transport Scotland Directorates	In 1 Year	2-5 Years	> 5 years	Total
	£'000	£'000	£'000	£'000
Infrastructure Projects	128,474	123,849	-	252,323
Roads Delivery and Operations	27,480	34,500	-	61,980
Transport Integration and Connectivity	492	5,612	-	6,104
Total contracted capital commitments for which no provision has been made	156,446	163,961	-	320,407

Note 15 - Commitments under IFRS 16 leases

No low-value leases or leases with a remaining term of less than 12 months existed as at 31 March 2026.

Commitments for Finance Leases also shown as Right of Use Assets.

Land and Buildings	As at 31 Mar 2026	As at 31 Mar 2025
Obligations under finance leases	£000	£000
The total future lease payments under finance leases
Total lease payments due within one year	558	553
Total lease payments due between 1 and 5 years	2,284	2,263
Total lease payments due thereafter	24,315	24,893
Sub-total	27,157	27,709
Less interest element	3,201	3,461
Present Value of Obligations under finance lease	23,956	24,248

Land and Buildings	As at 31 Mar 2026	As at 31 Mar 2025
Obligations under finance leases	£000	£000
The total future lease payments under finance leases
Total lease payments due within one year	303	292
Total lease payments due between 1 and 5 years	1,317	1,274
Total lease payments due thereafter	22,336	22,682
Present Value of Obligations under finance lease	23,956	24,248

When acting as a lessor, a determination is made at lease inception whether each lease is a finance or operating lease. To classify each lease, an overall assessment is made on whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease, if not then it is an operating lease.

When acting as an intermediate lessor, its interest in the head lease and the sublease is accounted for separately. Lease payments under operating leases are recognised as income on a straight-line basis over the length of the lease terms. The right of use asset and accumulated depreciation relating to the sublease element of the head lease is derecognised in the Statement of Financial Position. A lease receivable for the sublease, and any gains or losses on the lease receivable, is recognised in the Statement of Financial Position.

Sublease Receivable

In 2024-25, Transport Scotland entered into a sublease arrangement relating to part of the occupancy of the Bothwell Street office. As the sublease has been classified as a finance lease, Transport Scotland recognised a lease receivable from 1 April 2025.

Maturity Analysis of lease payments receivable (sublease)	As at 31 March 2026	As at 31 March 2025
The total future lease payments under finance leases	£000	£000
Total lease payments due within one year	411	-
Total lease payments due between 1 and 5 years	1,643	-
Total lease payments due thereafter	13,214	-
Undiscounted lease payments receivable	15,268	-
Less: Unearned finance income	1,646	-
Net investment in the sublease (lease receivable)	13,622	-

Note 16 - Service concession arrangements

Transport Scotland has entered into the following PFI contracts for the design, build, finance, and maintenance of assets reflected on the Statement of Financial Position:

M6 (A74M)

The contract covers the design, construction, and financing of 28.3km of new motorway, as well as the operation and maintenance of 90km of existing motorway. Payments are made under a shadow toll regime. The toll period began in July 1997 and expires in July 2027.

M77

The contract is a Public Private Partnership (PPP) entered into with East Renfrewshire and South Lanarkshire Councils. The project covers the design, construction, financing, and operation of 15km of motorway and 9km local road to the A726 trunk road. Payments are made under a shadow toll regime. The toll period began in April 2005 and expires in April 2035.

M80

The contract covers the design, build and financing of approximately 18km of motorway and associated roads, junctions, structures and associated works and their on-going maintenance for a period of 30 years. Unitary charge payments commenced in September 2011 and will cease in September 2041.

Under IFRIC 12 Service Concession Arrangements, the substance of these PFI contracts is that of a finance lease, with the asset being recognised. Payments under PFI contracts comprise two elements: imputed finance lease charges including interest and services charges.

We have reviewed the degree of control exercised by each of the parties in existing PFI contracts and conclude that the degree of control we retain satisfies the requirements that the related assets created are required to be accounted for on our Statement of Financial Position.

We also have the following design, build, finance and operate (DBFO) contracts, under the NPD model:

The M8, M73, M74 Motorway Improvements Project

Involved upgrades to the A8 Baillieston to Newhouse, completion of the M8 between Glasgow and Edinburgh, and included improvements to the M74 Raith Interchange and the widening of other key sections of the M8, M73 and M74. The NPD contract also incorporates the management, operation, and maintenance of this section of the motorway for the next 30 years. The new improvements opened to traffic in April 2017. The unitary charge payments are committed and will cease in 2047.

The AWPR / B-T (Aberdeen Western Peripheral Route/Balmedie-Tipperty)

Project involved the construction of a new dual carriageway around the City of Aberdeen and upgrading of the road between Balmedie and Tipperty to dual carriageway. The NPD contract also incorporates the management, operation, and maintenance of these roads for the next 30 years. The unitary charge payments became committed in phases from Autumn 2016 and will cease in 2048. The final phase of the project opened to traffic in February 2019.

Commitments under PFI Contracts

	As at 31/03/26	As at 31/03/25	As at 31/03/24
	£'000	£'000	£'000
Imputed finance lease obligations under PFI contracts comprise:
Rentals due within 1 year	114,110	115,417	115,402
Rentals due within 2 to 5 years	385,526	400,337	418,056
Rentals due thereafter	1,177,920	1,273,342	1,371,040
	1,677,556	1,789,096	1,904,498
Less: Interest element (finance cost)	(729,849)	(798,204)	(871,721)
Total capital cost	947,707	990,892	1,032,777

	As at 31/03/26	As at 31/03/25	As at 31/03/24
	£'000	£'000	£'000
Imputed service charge obligations under PFI contracts comprise:
Service charge due within 1 year	43,603	34,221	33,585
Service charge due within 2 to 5 years	189,673	185,291	175,572
Service charge due thereafter	899,190	935,721	981,184
Total service charge	1,132,466	1,155,233	1,190,342

Note 17 - Other financial commitments

	Value of Commitment Payable
Transport Scotland Directorates	In 1 Year	2-5 Years	> 5 years	Total
	£'000	£'000	£'000	£'000
Rail	988,658	1,678,788	-	2,667,446
Bus, Concessionary & Active Travel	1,893	6,757	1,764	10,414
Ferries and Ports	385,775	1,637,706	2,065,000	4,088,481
Transport Integration and Connectivity	9,850	7,940	5,916	23,706
Roads Delivery and Operations	820	1,639	-	2,459
Infrastructure Projects	770	8	-	778
Total	1,387,766	3,332,838	2,072,680	6,793,284

Rail

The table above takes into consideration that Network Rail outputs and associated funding for Control Period 7 (CP7) from 1 April 2024 to 31 March 2029 was determined by the Office of Rail Regulation (ORR). The overall funding available for Network Rail in CP7 was published in the Statement of Funds Available (SoFA). The Determination for CP7 is included in the table above.

Transport Scotland subsidised three rail operators that provided services in Scotland. These were: ScotRail Trains Ltd (SRT) and Caledonian Sleeper Ltd (CSL) as wholly owned subsidiaries of Scottish Rail Holdings Ltd (SRH), a company wholly owned by Scottish Ministers. The total amount charged to the Statement of Comprehensive Net Expenditure reflects the grants paid to Network Rail for OMR and enhancements, Cash Grant in Aid payments for SRH and subsidy payments for Cross Border Services. This is summarised below:

	2025-26	2024-25
	£'000	£'000
Network Rail OMR	461,740	465,133
Network Rail Enhancement Grant	149,336	166,537
Scottish Rail Holdings	841,321	818,572
Serco Caledonian Sleeper Services Limited & Cross Border Services	-	123
Total	1,452,397	1,450,365

Ferries

The agency has entered into contracts (which are not leases or PFI contracts or other service concession arrangement) for provision of ferry services in two regions - the Clyde and Hebrides; and Northern Isles.

The Clyde and Hebrides contract (CHFS) was from October 2016 to October 2024 and is provided by CalMac Ferries Ltd. We made arrangements to extend the existing CHFS contract for 12 months and progress arrangements for the direct award of the CHFS3 contract from 1 October 2025. Due diligence work on the direct award of the Clyde and Hebrides Ferry Service (CHFS) 3 contract was completed and the Cabinet Secretary for Transport announced on 8 May 2025 that Scottish Ministers agreed a direct award to CalMac Ferries Limited.

The Northern Isles contract (NIFS) runs from 30 June 2020 to 30 June 2028 and is operated by Serco NorthLink Ferries. There is a break clause after CY6 (30 June 2026) in the NIFS’s contract, so costs after this are not shown in the table above.

Lifeline air services

We support air routes from Glasgow to Barra, Tiree and Campbeltown. While the number of people using these routes is not enough to make them commercially viable for airlines, they nevertheless provide important connectivity to local communities.

To do this, we use Public Service Obligations (PSOs), which are obligations imposed on a route to provide a set specification of service. A PSO imposes obligations to ensure the minimum provision of service on a route in terms of continuity, regularity, pricing, or minimum capacity.

Our contract with Loganair for these three routes runs until 24 October 2027. The subsidy ensures that these isolated communities have air links with a main centre. Under Subsidy Control rules, it is necessary to seek competitive bids to allow subsidy to be paid. PSOs have also been imposed on routes within Shetland, Orkney, Comhairle nan Eilean Siar and Argyll & Bute, all of which are subsidised by the local authorities.

Roads

We provide grant funding to the Scottish Police Authority on an annual basis. This is to ensure the continued operation of the Scottish Safety Camera Programme.

Note 18 - Financial Instruments

18a. Financial Instruments by Category

		Total Financial Assets at Amortised Cost	Total
	Note	£’000	£’000
Assets per Statement of Financial Position
Trade and other receivables excluding prepayments, reimbursement of provisions and VAT recoverable		595,644	595,644
Balance as at 31 March 2026		595,644	595,644

		Other Financial Liabilities	Total
	Note	£’000	£’000
Liabilities per Statement of Financial Position
PFI & IFRS 16 liabilities	15, 16	974,832	974,832
Trade and other payables excluding statutory liabilities (VAT, income tax and social security)		248,306	248,306
Balance as at 31 March 2026		1,223,138	1,223,138

		Total Financial Assets at Amortised Cost	Total
2024-25	Note	£’000	£’000
Assets per Statement of Financial Position
Trade and other receivables excluding prepayments, reimbursement of provisions and VAT recoverable		485,740	485,740
Balance as at 31 March 2025		485,740	485,740

		Other Financial Liabilities	Total
2024-25	Note	£’000	£’000
Liabilities per Statement of Financial Position
PFI & IFRS 16 liabilities	15, 16	1,019,584	1,019,584
Trade and other payables excluding statutory liabilities (VAT, income tax and social security)		193,794	193,794
Balance as at 31 March 2025		1,213,378	1,213,378

18b. Financial Risk Factors

Due to the largely non-trading nature of its activities and the way in which Government Departments are financed, Transport Scotland is not exposed to the degree of financial risk faced by many other business entities. A high-level review of risk management is now considered at each meeting of the Audit and Risk Committee.

The table below analyses financial liabilities into relevant maturity groupings based on the remaining period at the Statement of Financial Position date to the contractual maturity date. The amounts disclosed are the contractual discounted cash flows. Balances due within 12 months are included at their carrying balances as the impact of discounting is not significant.

2025-26	Carrying value	0-12 months	1-2 years	3-5 years	5-10 years	>10 years
	£’000	£’000	£’000	£’000	£’000	£’000
Non-derivative liabilities	974,832	44,090	36,445	129,934	264,290	500,764
Derivative liabilities	-	-	-	-	-	-
Total financial liabilities	974,832	44,090	36,445	129,934	264,290	500,764

2024-25	Carrying value	0-12 months	1-2 years	3-5 years	5-10 years	>10 years
	£’000	£’000	£’000	£’000	£’000	£’000
Non-derivative liabilities	1,019,584	44,169	80,525	129,917	263,418	501,556
Derivative liabilities	-	-	-	-	-	-
Total financial liabilities	1,019,584	44,169	80,525	129,917	263,418	501,556

Note 19 – Contingent liabilities

19a Contingent liabilities disclosed under IAS 37

As part of Transport Scotland’s normal course of business, Scottish Forestry grants the right to use a forestry track as an emergency diversion route on the A83 Rest and Be Thankful on the understanding that Transport Scotland has the liability for any incidents that may occur whilst the track is being used for this purpose. The potential obligation is estimated at £5 million but it is considered unlikely that any liability will occur.

Subsequent to the reporting date, legal proceedings were commenced against Transport Scotland in respect of matters arising before the year end. The proceedings remain at an early stage and the outcome, together with any associated financial impact, cannot presently be determined. Accordingly, no provision has been recognised in these financial statements.

19b Remote contingent liabilities not required under IAS 37 but included for Parliamentary reporting and accountability purposes

The FReM states that where information about contingent liabilities is not required to be disclosed because the likelihood of a transfer of economic benefits is considered too remote, they should be disclosed separately for parliamentary reporting and accountability purposes.

i. Contracts held by Transport Scotland should include indemnity clauses where risk is either considered part of the normal course of business or is not quantifiable:

Indemnity clauses in roads contracts to compensate Network Rail for any damage or loss of access

ii. Guarantees/Letters of Comfort issued by Transport Scotland on behalf of Scottish Ministers:

Guarantees issued under Section 54 of the Railways Act 1993 as part of rail rolling stock procurement process, which enables Scottish Ministers to give undertakings regarding the use of rolling stock. These undertakings specify the future financial obligations that Scottish Ministers will ensure are met to secure availability of the rolling stock. The table below summarises quantifiable contingent liabilities in relation to these guarantees with the amounts disclosed reflecting the highest reasonable estimate of the possible liability in relation to future payments that fall due after the expiry of existing agreements with train operators.

Guarantees in Place as at 31 Mar 2026	£'m
Section 54 Guarantee for Caledonian Rail Leasing Limited Class 385 Type Rolling Stock until 28 February 2044	175.2
Section 54 Guarantee for Eversholt Class 380 Type Rolling Stock Until 31 December 2040	68.9
Section 54 Guarantee for Porterbrook Class 170 Type Rolling Stock Until 31 March 2035	20.0
Section 54 Guarantee for Caledonian Rail Sleeper Leasing Limited Mark 5 Rolling Stock until 31 March 2040	28.2
Section 54 Guarantee for Angel Trains 156 Type Rolling Stock Until 31 December 2031	1.4
Section 54 Guarantee for Porterbrook Class 158 Type Rolling Stock Until 31 March 2033	8.6
Section 54 Guarantee for Eversholt Class 222 Type Rolling Stock Until 31 December 2040	28.1
Total	330.4

ScotRail Trains Grant Agreement expires on 31 March 2032 and the liabilities shown above are from that date to the end of the Section 54 guarantee. Caledonian Sleeper Grant Agreement expires on 25 June 2033, and the liabilities shown above are from that date to the end of the Section 54 guarantee.

Commitment towards the continued funding of the pension obligations of ScotRail Trains Ltd and Serco Caledonian Sleeper Limited through the Grant and Franchise Agreements.

iii. Other contingent liabilities held by Transport Scotland

There are a number of compulsory purchase compensation claims ongoing, upon which some compensation may be payable in the future. These cases are currently ongoing, and the amount payable has not been quantified at this stage.

During 2022-23, Scottish Ministers signed a legally binding covenant which was issued to the Trustees of the Highlands and Islands Pension Scheme. This covenant provided guarantees to the Trustees that Scottish Ministers would become liable to make any payments due to the pension scheme in the event that the principal employer, Highlands and Islands Airport Limited, are unable to pay any sum owed to the pension scheme.

Note 20 - Related Parties

Transport Scotland is an Executive Agency of the Scottish Government. The Scottish Government is regarded as a related party with which it had various material transactions during the year. Scottish Rail Holdings Ltd, David MacBrayne Ltd, Caledonian Maritime Assets Ltd, and Highlands and Islands Airports Ltd are wholly owned subsidiaries in the name of the Scottish Ministers, with whom Transport Scotland also had various material transactions during the year. ScotRail Trains Limited and Caledonian Sleeper Limited are subsidiaries of Scottish Rail Holdings Limited under the statutory Operator of Last Resort arrangements.

Loans were advanced to and repaid by CMAL to fund vessel construction and to HIAL to support air infrastructure. Grants were paid to HIAL to subsidise its operating capital expenditure and to CMAL to fund agreed pier and harbour infrastructure projects. David MacBrayne Ltd is the parent company of Calmac Ferries Ltd and Argyle Ferries Ltd who operated ferry services under contracts with Transport Scotland and which Transport Scotland supported via the payment of subsidies.

Transport Scotland paid grants to British Waterways Scotland, trading as Scottish Canals, for the operation and maintenance of Scottish canals and related infrastructure and capital grants for related investments during the year.

Transport Scotland also had significant transactions with Local Authorities, Strathclyde Partnership for Transport, Scottish Water, and the Tay Road Bridge Joint Board during the year, principally in relation to payment of grants to deliver specific transport objectives.

All interests declared by members of the Transport Scotland Senior Management Team are of a minor nature and have no impact on the awarding of contracts and commissions.

Note 21 - Segmental Reporting

21a Business Segments – Statement of Comprehensive Net Expenditure

2025-26	Resource	Net Investment	Income	Non Cash	AME	ODEL	Total
Total continuing segments	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Roads	178,811	302,221	(72)	302,451		108,748	892,159
Rail	460,691	1,005,742	(16,672)	-			1,449,761
Bus Services	479,278	536		-			479,814
Ferry services in Scotland	313,616	55,174	(15,853)	-	(8,415)		344,520
Air services in Scotland	61,519	4,516	(59)	-	-	-	65,977
Other transport directorate programmes	72,068	173,137	(687)	8,176	-	-	252,694
Grants to Local Authorities	-	12,400	-	-	-	-	12,400
	1,565,983	1,553,726	(33,343)	310,627	(8,415)	108,748	3,497,326

2024-25	Resource	Net Investment	Income	Non Cash	AME	ODEL	Total
Total continuing segments	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Roads	168,814	230,707	-	83,128	2,844	102,941	588,434
Rail	455,257	1,012,295	-	70	-	-	1,467,622
Bus Services	445,404	1,510	-	-	-	-	446,914
Other public transport	12,845	-	-	-	-	-	12,845
Ferry services in Scotland	278,762	72,209	(12,083)	-	(15,192)	-	323,696
Air services in Scotland	59,992	14,980	-	-	-	-	74,972
Other transport directorate programmes	46,891	172,874	(161)	1,620	(10,780)	-	210,444
Grants to Local Authorities	41,914	-	-	-	-	-	41,914
	1,509,879	1,504,575	(12,243)	84,817	(23,128)	102,941	3,166,841

21b Business Segments – Capital Expenditure

2025-26	Trunk Road Maintenance	Capital Projects	Loans	Total Capital Expenditure
Total continuing segments	£'000	£'000	£'000	£'000
Roads	131,069	146,203	-	277,272
Other public transport	687	-	(12,362)	(11,675)
Ferry, aviation and other services in Scotland	-	-	90,950	90,950
	131,756	146,203	78,588	356,547

2024-25	Trunk Road Maintenance	Capital Projects	Loans	Total Capital Expenditure
Total continuing segments	£'000	£'000	£'000	£'000
Roads	144,057	68,975	-	213,032
Other public transport	2,755	-	(47,051)	(44,296)
Ferry, aviation and other services in Scotland	-	-	98,312	98,312
	146,812	68,975	51,261	267,048

Note 22 - Notional charges

The following notional charges have been included in the accounts.

		2025-26	2024-25
	Note	£'000	£'000
Auditors' remuneration	3	215	206
		215	206

Note 23 - Losses and Special Payments

The costs of damage to the trunk road network due to road accidents are charged to Transport Scotland as part of the road maintenance programme. These costs are recovered from the party responsible through their insurance company wherever possible except where there has been a fatal injury. These costs are held in a debtor account until the recovery is successful.

		2025-26	2024-25
	Number of cases	£'000	£'000
Total cash losses	6	70	197
Details of cases over £250,000	-	-	-
Including
- claims abandoned	6	70	197
- active claims	-	-	-

Note 24 - Events after the Reporting Period

On 1^st September 2026, the Scottish Government published its Programme for Government 2026 to 2031, which included a proposal to bring Transport Scotland back into the Scottish Government as part of wider public sector reform.

The proposal is subject to further development and implementation arrangements, including consideration of the timing and mechanism of any transfer. At the date of authorising these financial statements, the financial and operational implications of the proposed change have not been determined, and no transfer date has been established.

The announcement is considered to be a non-adjusting event after the reporting period. No adjustment has therefore been made to the financial statements for the year ended 31^st March 2026.

Transport Scotland Accounts Direction by the Scottish Ministers

By the Scottish Ministers

In accordance with section 19(4) of the Public Finance and Accountability (Scotland) act 2000

1. The statement of accounts for the financial year ended 31 March 2007 and subsequent years shall comply with the accounting principles and disclosure requirements of the edition of the Government Financial Reporting Manual (FReM) which is in force for the year for which the statement of accounts are prepared.
2. The accounts shall be prepared so as to give a true and fair view of the income and expenditure, recognised gains and losses, and cash flows for the financial year, and of the state of affairs as at the end of the financial year.
3. This direction shall be reproduced as an appendix to the statement of accounts.

Signed by the authority of the Scottish Ministers

Dated 17 January 2006