The Government is suspending rail franchise agreements for six months and asking existing operators to run services under management contracts.
In addition, passengers with advance tickets will be able to claim refunds, while season ticket holders will be able to claim a refund for unused time on their tickets.
The move comes after many firms announced significant cuts to their services.
Transport secretary Grant Shapps said: ‘We are taking this action to protect the key workers who depend on our railways to carry on their vital roles, the hardworking commuters who have radically altered their lives to combat the spread of coronavirus, and the frontline rail staff who are keeping the country moving.’
He added that allowing refunds would ‘ensure no-one is unfairly out of pocket for doing the right thing’.
The Department for Transport (DfT) said existing franchise arrangements are incompatible with the Covid-19 situation or conducive to the flexibility that the Government will need in coming months.
The new arrangements will freeze all existing responsibilities and liabilities and transfer all revenue and cost risk to the Government for a limited period, initially six months.
Operators will continue to run services day-to-day for what the DfT described as ‘a small predetermined management fee’, set at a maximum of 2% of the cost base of the franchise before the Covid-19 pandemic began.
The move does not affect all rail firms as some are already run under non-franchise arrangements.
Officials said this intended to incentivise operators to meet reliability, punctuality and other targets and ‘far less than recent profits earned by train operators’.
They added that allowing operators to enter insolvency would cause significantly more disruption to passengers and higher costs to the taxpayer, and that if an operator ‘does not wish to accept an Emergency Measures Agreement, the Government’s Operator of Last Resort stands ready to step in’.
However, Paul Plummer, chief executive of the Rail Delivery Group, which represents train operators and Network Rail, said: ‘The industry strongly welcomes the Department for Transport’s offer of temporary support and while we need to finalise the details, this will ensure that train companies can focus all their efforts on delivering a vital service at a time of national need.
‘We would like to thank our people, who continue to do an incredible job in difficult circumstances.’
Andy McDonald MP, Labour’s shadow transport secretary, said the party ‘backs measures that will keep key workers and freight moving on our railway during this crisis’.
He added: ‘However, this is a time limited arrangement by Government in response to a crippling crisis on our railway rather than a long-term solution. Labour welcomes an honest debate on the future of our transport system post-crisis in order to address the fundamental issues with our current networks.’
Mick Cash, general secretary of the RMT rail union, said: 'It is absolutely essential that the rail workforce get the same sort of guarantees and assurances that the Government are offering the train operators.
‘It is crucial that jobs and skills are ?protected now to ensure the transport sector is fit and ready when the time comes to get back to normal.’