UK-domiciled people who hold foreign-based investments, bank accounts and real estate are deluded in thinking they will escape UK inheritance tax, a survey shows.

UK-domiciled people who hold foreign-based investments, bank accounts and real estate are deluded in thinking they will escape UK inheritance tax, according to a Skandia International survey conducted among 377 financial advisors worldwide.

The survey suggests many individuals are in danger of breaking UK tax law particularly as revenue authorities chase tax evaders - and some forms of avoidance - more aggressively at home and overseas. Authorities such as HM Revenue & Customs, and their counterparts, have also been operating voluntary disclosure programmes with jurisdictions such as Switzerland in recent years as part of a drive to recover revenues.

The poll found that 70 per cent of financial advisors said their clients think overseas assets escape IHT in the UK. This belief is “totally incorrect” for anyone who is UK-domiciled or deemed to be so, Skandia International, part of Old Mutual Wealth, said of its findings. Unless clients act to regularise their affairs, they face a 40 per cent tax on their death, it said.

Money held overseas may now need to be disclosed to HM Revenue & Customs anyway as part of the government’s clamp down on tax avoidance. People with overseas assets should firstly disclose the asset to HMRC then, once the asset is “visible”, steps need to be taken to make the asset as tax efficient as possible, the firm said.

Skandia International suggested options such as putting non-UK investments into an offshore bond written as a gift trust.

“People shouldn’t just ignore their obligations on their overseas assets, not least due to the disclosure rules which require all overseas assets to be declared to HMRC. Financial advisors are best placed to assist anyone concerned about their obligations and can help put in place steps to mitigate the tax and administrative burden once assets become disclosed,” Steve Lawless, global head of banking distribution at Skandia, said.