Paying a year after for that night before

Office parties at Christmas could leave revellers nursing more than a hangover and year-round embarrassment at their scandalous behaviour. They could be faced with a bill from the taxman.

Staff might rue not only that ill-advised grope behind the filing cabinet, but also their company's seemingly generous decision to pay more than £50 a head for food, dancing, gifts and decorations at the party.

Mike Warburton, head of tax at Grant Thornton, a firm of business advisers, says the Inland Revenue allows a budget of £50 a head free of tax and National Insurance.

But if the budget is stretched by even a penny a head, staff will find themselves paying up to 40 per cent tax at the marginal rate on their perceived benefit.

If a firm spends less than that amount, there is no requirement to make a declaration to the Inland Revenue.

Over the limit, however, employers must obtain and complete form P11D from the Revenue.

Mr Warburton has additional advice on Christmas bonuses for employees: ``These are subject to tax and National Insurance just like every other payment.

"The real Christmas spirit comes into play when employers gross up the bonus to pay the tax through PAYE and top it up with NI contributions too. That way a bonus is really worth the paper it's printed on."

Company car drivers who receive mobile telephones with their new cars could also find themselves ringing up a tax bill, according to David Daly, a senior partner at Clark Whitehill, a firm of chartered accountants.

Mr Daly says company mobile phones are considered a perk if used for anything other than business calls.

"Some motor manufacturers are offering free phones as a incentive to encourage car sales," he said. "Drivers who make personal calls without reimbursing their companies for the cost of calls are runing the risk of being hit for extra tax."

Benefit-in-kind scale charges for mobile phones are £200. This means that at standard rates of tax a user could be liable for up to £50 extra a year.

Higher-rate taxpayers could be asked to pay £80 a year.