Google has been challenged by British MPs over the way it reports its income for tax.

The chair of the House of Commons Public Accounts Committee, Margaret Hodge, said whistleblowers had told her that Google had sold advertising within the UK and invoiced customers in the UK.

Google had earlier said that UK customers paid Google in Ireland.

The Google UK boss was repeatedly asked where the business makes its sales, and MPs suggested that the company may be misleading Parliament.

Google's head of sales in Northern Europe, Matt Brittin said that any advertiser in Europe would deal directly with Google in Dublin, which employs about 3,000 staff.

He said: "When we came to Europe, we set up Dublin as our European headquarters. We wanted to be able to contract with customers across the whole of Europe, not just the UK. Any customer that spends with us, they have to buy from Ireland, because that's where the intellectual property sits."

He added that nobody in the UK can execute transactions, and no money changes hands, despite the fact that Google employs sales staff in Britain.

But Ms Hodge said: "It was quite clear from all that documentation that the entire trading process and sales process took place in the UK."

Google's sales in the UK are worth £3.2 billion, but most are routed through Dublin. In 2011 it paid £6m in UK corporation tax.

Ms Hodge ended the question session with Mr Brittin by thanking him for sitting before the Committee, and said: "You say you're a company that does no evil. Well I think you do do evil."