The cost of providing the Christmas dinner for staff will be a tax deductible expense for your business. However, you will need to consider the benefit in kind rules for the employees.
If you provide employees with one annual function, no tax charges arises if the cost of the event per head does not exceed £150 including VAT. You must provide this event to all employees; not just a select few, otherwise the £150 exemption will be unavailable.
If you provide more than one social event for your staff each year, then it is the total costs for all the events that the limit is applied to. If the total costs are below the limit, then no tax charge arises. However, if the combined costs including VAT exceed £150 per head, then a benefit in kind would arise. Whichever functions best utilise the £150 limit would be exempt; the others would then be taxable.
If one event alone had costs in excess of £150 per head, the entire amount is assessable as a benefit in kind; not just the excess.
Entertaining is always a grey area; both in terms of whether it is tax deductible and whether the VAT may be recovered. Your local TaxAssist Accountant would be happy to discuss this further with you.