Formula one and the 2021 Budget Cap breach by Red Bull Racing

[Harrison]

Formula One and the Red Bull Racing 2021 cost cap.

Many will know about this current situation in F1 and the new budget cap, to restrict teams spending to try and make the sport a level playing field for fair competition between all teams.

It was announced on Monday that Red Bull Racing had breached the 2021 cost cap by a minor amount (less than 5% over the cap). This has led to many Hamilton fans demanding Max Verstappen be stripped of the 2001 Championship and it be awarded to Hamilton. This a knee jerk reaction before they even know any details. Just shouting RBR are cheats.

The latest information casts light on the real reason for this supposed breach of the cap.

It is due to a disagreement between the FIA ​​accountants and RBR over whether Adrian Newey is an employee of RBR.

The FIA ​​says he is not an employee because he sends his costs from his one-man company RACING SERVICES LIMITED to RBR, and therefore his costs belong to the budget cap. RBR says he is an employee and they have therefore placed his costs with the three highest-earning employees, and they are not counted in the budget cap.

The European GAAP describes what is meant by employee. Someone who works with his one-person company for a large company and does that more than two days a week for an extended period and earns at least 2/3 of the minimum wage as an employee of that large company.

From an RBR perspective they are right and he is a RBR employee. In addition according to EU tax laws and UK HMRC rules if an independent contractor works solely for one organisation and is only paid by that organisation then they are considered an employee.

But the FIA ​​maintains that he is not a RBR employee as he is not on their payroll but they pay his monthly bills. This isn't about a loophole, let alone cheating. This is purely about the interpretation of the word "employee".

The FIA ​​accountants and RBR will have to discuss this extensively about who is right with regard to "employee."

It seems the FIA again have written their rules open to interpretation. RBR are correct by the laws govening them, in Austria where they are registered, and in the UK where they operate. Therefore the FIA is legally wrong. Without including Adrian Newey's wages in the accounts RBR are within the Budget cap. The wages of the top 3 earners in an F1 team are not included in the cap. Therefore this purely comes down to the FIA's interpretation of what an employee is. And I think if this were to go to court they would lose against RBR as the FIA is registered in France, so their interpretation of an Employee should fall within the EU definition.

[J T]

This sort of courtroom drama makes F1 significantly less interesting and seems like rich folk squabbling. I was never a huge fan of it, but enjoyed the odd race in the past. The thought of a result being overturned post-event is a turn off FO SHO.

The FIA ​​says he is not an employee because he sends his costs from his one-man company RACING SERVICES LIMITED to RBR, and therefore his costs belong to the budget cap

Are his costs just his wages, or other stuff too? What's to stop other teams doing similar and trying to sneak stuff through. Regardless of the outcome or the intent, it does seem a bit.... unclear

[Harrison]

Post race result changes are never a good outcome and traditionally the FIA haven't tended to do this. Instead giving out monetary penalties, or in extreme cases constructors points deducted so it doesn't impact the drivers championship.

Not sure on the penalties for the cost cap breaches as this is new and the first year it has been enforced.

As for Adrian Newey. AFAIK it is just for his wages. Nothing else. He is self employed under his own company name, which I expect is to manage his taxes and expenses easier. But as he is only working for Redbull as a sole client, in their view and EU tax law he is their employee.

But apparently if the FIA manage to enforce their stance, and Adrian Newey's wages are included in the cost cap, the RBR would select the next highest wage earner as the third wage exempt from the cap. This would only put them an estimated £150k over the cap, which in the F1 world is nothing.

[Kin Hell]

F1 went wrong after the French took over.

[Harrison]

it is a bit mad when you consider 9/10 F1 teams are based in the UK, the majority of R&D and testing is carried out here, and a large percentage of staff and pit crews are British. Plus F1 was born in the UK. Yet it's governed by a French Paris based organisation.

I would argue though that it's gone down the drain since the Americans took over.

[Kin Hell]

The French still F'kd it first!