AS Scotland’s beleaguered tourism industry continues to weather the impact of Covid-19, could the prospect of converting some of our historic properties into high-end hotels benefit the sector and deliver a post-pandemic economic boost?

Prior to lockdown Scottish tourism was booming, with visitors spending more than £7 billion here in 2018. The sector employs around 205,000 people and will be a key factor in Scotland’s post-Covid economic recovery.

Transforming buildings including churches, castles, and stately homes into government-run tourist attractions was discussed at the recent SNP conference as part of a rural stimulus plan. The concept is modelled on Span’s "paradores", which generated £230m turnover in 2019 with the proceeds going directly into its national coffers.

While there are differences in the structure of our tourism sector compared with Spain’s, the concept of Scottish paradores is definitely worth further consideration. First, from a tax perspective, converting non-residential buildings into income-generating accommodation sites comes with advantages as the building work costs can benefit from the 5% VAT rate. VAT registration by the vehicle operating the accommodation can also enable any VAT costs to be recovered, further contributing to its financially viability.

Whether governments are best-placed to run a surplus-generating tourism business is a matter of some debate, although an arms-length organisation would likely be created to effectively manage a network of Scottish paradores.

A further consideration is where the Scottish Government should be investing public money in these developments. With some parts of Scotland – including Edinburgh city centre and many communities on the North Coast 500 route – feeling a significant pressure from pre-pandemic tourism saturation, it makes little sense to be investing in new facilities in these areas. However, by focusing on communities that have not yet benefitted from tourism expansion, the Scottish Government could help grow the sector in selected areas.

Disused church properties could also play a significant role in creating higher-end tourist accommodation in what are currently less frequented parts of Scotland, and there are a growing number of these sites available for development. In addition to the longer-term trend of former churches being sold for alternative use developments, the Church of Scotland announced in October it was selling off scores of buildings across the country after lockdown restrictions had left facing a projected £20m drop in its annual revenue.

The Kirk manages one of the country’s largest portfolios of buildings and sites, with more than 5,000 properties spread throughout Scotland. This portfolio, along with other denominations’ mothballed churches, could provide an opportunity for more deprived areas to harness the economic benefits of a thriving tourism sector.

Despite the significant challenges it currently faces, there is every reason to anticipate a bright longer-term future for Scottish tourism. A combination of Government-backed Scottish paradores along with disused churches being redeveloped for high quality visitor accommodation could bring further value to our tourism offering. It could also help ensure a wider spread of the economic benefits to all parts of the nation.

Iain Masterton is Head of VAT at accountants Chiene + Tait