MPs have been sharply critical of HMRC's failure to crack down on aggressive tax avoidance schemes, saying it should make greater use of the sanctions available and claiming the department 'seems to lose its nerve' when it comes to mounting prosecutions against multinational corporations, while pursuing smaller businesses.

The Public Accounts Committee (PAC) report HMRC tax collection: Annual Report & Accounts 2012-13says that last year the department collected less tax in real terms than it managed to collect the previous year, while the tax gap grew to £35bn.

The report recommends that HMRC should be explicit about the limitations of its current measure of the tax gap and gather intelligence about the value of tax lost through aggressive tax avoidance schemes.

PAC wants HMRC to demonstrate that it deals robustly with individuals and companies who deliberately mislead it, saying the lack of prosecutions against multinational corporations seems at odds with HMRC's stance on pursuing tax debt from small and medium-sized businesses in the UK.

PAC chair Margaret Hodge said: 'In pursuing unpaid tax, HMRC has not clearly demonstrated that it is on the side of the majority of taxpayers who pay their taxes in full.'

The report's findings were rejected by HMRC, which accused the committee of 'selective and misleading use of figures', particularly when calculating the tax gap. A spokesman said MPs had highlighted the increase in money which had not been collected instead of calculating a percentage of uncollected tax, which has actually gone down.

In a statement, HMRC said: 'HMRC seeks to collect the tax that is due from all taxpayers, so that everyone pays their fair share in accordance with the tax laws passed by parliament. We have carried out 2,345 prosecutions for tax evasion in the last three years, including of high-profile accountants and lawyers, have halved the number of disclosed tax avoidance schemes and have protected more than £2.4bn from marketed tax avoidance schemes this year alone.'

Hodge said HMRC had 'massively over-estimated' how much it could collect from UK holders of Swiss bank accounts and has not been sufficiently vigorous in pursuing outstanding liabilities. Original predictions suggested it would collect £3.12bn and this figure was built into budget estimates, but in 2013-14 it has so far secured just £440m.

'We were astonished that HMRC could not give any reasons for such a shortfall, or what it was doing to gather the data it needs from the Swiss authorities to assess and collect the tax due,' Hodge said.

The PAC warned that HMRC was not doing enough to anticipate how changes in tax rules designed to make the UK more attractive to business could also enable international corporations to avoid tax.

Hodge said: 'Changes in the controlled foreign company rules and the failure to close the loophole created by Eurobonds are two examples showing where it has become easier for companies to avoid tax while ordinary people continue to pay their share. If that is HMRC's real intent, then it should be open about it. When designing the tax regime for businesses, HMRC needs to strike the right balance between support and enforcement.'

The report described HMRC's progress in introducing the Real Time Information (RTI) system for PAYE as 'encouraging overall', but said it should do more to analyse problems facing small companies who use the system and should develop full disaster recovery arrangements in the event of failure, particularly around the introduction of Universal Credit.