It is Christmas time on the Island of Sodor and Thomas is delivering a load of salt to Tidmouth Town Hall to prevent people from slipping on the pavements. As Thomas pulls in at the Town Square, he skids on the icy rails. Edward reminds Thomas that is what his sandboxes are for. Thomas knows all about using his sandbox in icy conditions and has his box refilled. Then, the Fat Controller arrives and thanks Thomas for delivering the salt and tells him that he has an even more important job for him. The Fat Controller sends Thomas to the Docks to collect a special Christmas crate with a big, red strap which will kick off their Christmas celebration in style.
Meanwhile, at the Docks, Cranky is lifting a seemingly endless amount of crates until he gets to the special Christmas crate. Unfortunately, as Cranky is admiring it, a ship's horn makes him jump, causing Cranky to drop the important crate. Cranky thinks he has broken the contents of the crate and quickly hides it behind other crates. Then, Thomas arrives to pick up the Christmas crate, but Cranky pretends he has not seen it. Thomas is concerned and hurries back to Tidmouth Town Hall.
The children cheer as Thomas pulls back into the Town Square, but the Fat Controller asks where the special Christmas crate is. Thomas tells him that Cranky has not seen any Christmas crate. The Fat Controller is confused and soon becomes worried when the Mayor of Sodor arrives, eager to see the special surprise. Thomas says he will go back to the Docks and search the place from top to bottom if necessary. Thomas backs away and Edward calls out to remind Thomas that he has not refilled his sandbox, but Thomas is in such a rush to get back to the Docks, that he does not hear Edward.
Back at the Docks, Thomas starts searching, but every time he gets close to discovering the crate, Cranky moves more crates to hide it. Eventually, it is Salty who spots the special crate, much to Cranky's annoyance. The crate is loaded into Thomas' truck and the little tank engine heads back towards Tidmouth.
As he approaches the Town Hall, Thomas realises his sandbox is empty. Thomas tries to stop on the icy tracks, but he cannot. Edward pours sand from his own sandbox on the line in front of Thomas who is now able to brake successfully. Unfortunately, Thomas brakes too sharply and the special Christmas crate flies through the air and lands in the town square with a terrible crash. Thomas is sure he has broken the contents of the crate, but the Fat Controller inspects it and everything is fine. Inside the crate is everything needed to set up an ice rink in the Town Square.
By evening, the ice rink is in full use and everyone is having a fantastic time, except perhaps the Fat Controller, who has some trouble getting the hang of ice skating. The Mayor praises Thomas and when the Fat Controller slips over, the cheeky little tank engine suggests that the controller needs his own sandbox.
Later that night, Thomas goes to Brendam Docks to share his story with Salty, Porter and Cranky. Thomas explains that he was sure the contents of the crate were broken, but it was just the rattling of the ice skates inside. Everyone laughs until Cranky, without thinking, reveals that he thought the same thing when he dropped the crate earlier. Thomas is surprised, but Cranky tells him that was why he was hiding it. Thomas is even more surprised to hear this. Cranky apologises and requests that they all forget it since it is Christmas. Salty agrees and gets everyone singing "We Wish You a Merry Christmas" with the added line, "and a Cranky New Year!".