The answer is probably! maybe?

HMRC have an Exemption (not an allowance) of £150.

If the employer provides two or more annual parties or functions, no charge arises in respect of the party, or parties, for which cost(s) per head do not exceed £150 in aggregate. Where there is more than one annual function potentially within the exemption, we do not expect employers to keep a cumulative record, employee by employee, of functions attended. But for each function the cost per head should be calculated. The cost per head of subsequent functions should be added. If the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt, the others taxable (see examples at EIM21691).

The figure of £150 is not an allowance. For functions that are outside the scope of the exemption (see example at EIM21691) directors and employees, except those in an excluded employment, are chargeable on the full cost per head, not just the excess over £150, in respect of:

• themselves and
• any members of their family and household who attend as guests.

The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.

http://www.hmrc.gov.uk/manuals/eimanual/eim21690.htm

Things to watch out for:

1. The function must be open to all staff, if its just directors, its taxable

2. The cost must not exceed £150 per head, otherwise it will all be taxable http://www.companychristmas.co.uk/news/tax_free_christmas_parties

3. If you have several events during the year you may have to choose which ones qualify if the total exceeds £150

steve@bicknells.net