Under the new ruling, hidden in a Customs leaflet on tax appeals, only a maximum of 50 per cent of the VAT can be claimed back - and this may be cut to nothing.
For example, a Christmas party at London's prestigious Roof Garden for 400 staff could now cost a company an extra pounds 5,000. A less lavish occasion at, say, pounds 35 per head, could cost an extra pounds 6 per person.
Roger Burrows, head of VAT at Coopers & Lybrand's west London office, said: 'This change in practice - which does not appear to have any legal backing - has not been widely publicised.'
Tony McClenaghan, VAT partner at accountants Touche Ross, added: 'Companies can absorb the additional cost or cut back on what they are going to provide.'
Saatchi & Saatchi, host of the now infamous 1989 Christmas party in Alexandra Palace that reputedly cost pounds 110,000, refused to comment. On a party like that, the VAT clampdown could cost an extra pounds 18,000.Reuse content