2021 Cost Cap Rumours and Speculation

[mendis]

Reading the excuses made up by the public, in this thread and elsewhere, is pure gold

Exactly!
The FIA have retained some of the most competent set of finance people for this.
You would think a bunch of highschool students were doing the audit based on some of the excuses here.
The breach is very clear cut. In the tax world you have avoiding and evasion.
What redbull likely did is "evade" and were caught. It's not a matter of missunderstanding. More than likely attempts were made to classify car related expenses as something else like fleet maintenance and it was uncovered.
The focus should shift to how can the FIA maintain the promise of being equitable.

Mercedes suffered like other teams to cut staff and not bring upgrades to obey the rules...

Likewise ferrari..

So are they to accept that redbull get a fine but still keep their championship won by an unfair advantage?

Whatever is done, must be equitable. It cannot be that others had their hands tied behind their backs in 2021 and 2022 and the one who overspent gets a fine or reprimand.

I think disqualification from both championships in 2021 is fair but harsh. Similar to track and field or any other competitive and equitable sport.
They and anyone else definitely wont try evading again if they realize the FIA are not playing around. The budget cap is very key to saving the sport. Without it we will be in for many more boring championships.

It's safe to say, Mercedes struggled with a poor concept and inability to build a top car for new regulations. Ferrari did. Can't use one team's f**k up to amplify another team's crime. They had dropped the ball on W12 as well with the floor changes while they were wildly ahead with W11.

[Wouter]

According to sources, the point of contention is how Adrian Newey is on the payroll.
According to Red Bull, he is 1 of the three big earners, however, according to the FIA, he is a so-called ZZP-er.
(self-employed without staff)
In fact, Newey is affiliated with Red Bull on a consultancy contract.

A German source AMuS.

https://www.auto-motor-und-sport.de/for ... antworten/

[mendis]

The options in front of Red Bull and how it can potentially play out.

https://the-race.com/formula-1/what-hap ... -standoff/

Red Bull’s emphatic but cooperative statement indicated that it would work with the FIA in following the correct procedure from here.

The cost cap administration “is currently determining the appropriate course of action to be taken”, and doubtless the first choice course of action would be to reach an accepted breach agreement with Red Bull. For that to happen, Red Bull would presumably have to accept that the way it interpreted certain aspects of the financial regulations is incorrect.

But it’s important to note that the accepted breach agreement would carry with it not only a milder punishment, but is also not able to be protested by anyone.

As Red Bull has set out its stall to fight this, an accepted breach agreement seems unlikely for the time being. That means it will defend its interpretation and submission, arguing that the way it has calculated its cost cap spending figure is correct.

If it can’t do that, and is unwilling to enter into any kind of accepted breach agreement, then the cost cap administration can issue a ruling and a punishment. Red Bull could appeal against that and, as always, there’s the possibility of the ‘nuclear option’ of taking it to a real-world court.

WHAT HAPPENS IF RED BULL SUCCESSFULLY OVERTURNS THE VERDICT?

If Red Bull’s cost cap submission is later accepted as correct, by definition it will set a precedent for however it is accounting for certain aspects of its spending. That means other teams operating on the cost cap will be able to do the same and surely will do if it’s providing a benefit.

It’s inevitable this will mean clarifications of how the rules are interpreted and applied. And it’s important to note that it is entirely possible that the way Red Bull has put together its submission is correct according to the wording of the rules.

Given Red Bull appears keen to do battle with the cost cap administration on the details of its submission, that would indicate the team believes its interpretations are defensible and therefore acceptable under the regulations.

HOW LONG WILL THIS PROCESS TAKE?

How long is a piece of string?

Red Bull will presumably have known about question marks about aspects of its submissions given the constant back and forth between the cost cap administration and the teams. But now it has officially been found to have committed a minor breach of the cost cap, this moves into the next phase.

With the stakes raised, it’s likely that the cost cap administration will want a quick resolution. But if it comes down to lengthy technical arguments about the wording of the regulations and accounting, it could conceivably take some time.

So the key factors in how quickly this will be resolved is just how hard Red Bull is willing to fight its corner.

[mendis]

According to sources, the point of contention is how Adrian Newey is on the payroll.
According to Red Bull, he is 1 of the three big earners, however, according to the FIA, he is a so-called ZZP-er.
(self-employed without staff)
In fact, Newey is affiliated with Red Bull on a consultancy contract.

A German source AMuS.

https://www.auto-motor-und-sport.de/for ... antworten/

So if I understand it correct, the payment to Newey has to be included as a payment to any consulting agency and comes under the budget. Whereas RB is saying, he is an employee and one of the top 3 in terms of pay and that's why his pay cannot be part of budget cap.

[GrizzleBoy]

I wonder what Mr Neweys salary is then......

[Just_a_fan]

According to sources, the point of contention is how Adrian Newey is on the payroll.
According to Red Bull, he is 1 of the three big earners, however, according to the FIA, he is a so-called ZZP-er.
(self-employed without staff)
In fact, Newey is affiliated with Red Bull on a consultancy contract.

A German source AMuS.

https://www.auto-motor-und-sport.de/for ... antworten/

If he's employed on a consultancy contract then he's not a top 3 salary because they are people employed by the team.

If they off-book him for taxation purposes (which is why he'll be a contractor) then he's off-book for the FIA's purposes as well. Simple really.

If the point of contention is his salary then that's a big figure overspend - Newey will be on multiple millions which means the FIA have found them to multiple millions overspent. If that's the case, that's going to cause waves amongst the other teams.

[mendis]

According to sources, the point of contention is how Adrian Newey is on the payroll.
According to Red Bull, he is 1 of the three big earners, however, according to the FIA, he is a so-called ZZP-er.
(self-employed without staff)
In fact, Newey is affiliated with Red Bull on a consultancy contract.

A German source AMuS.

https://www.auto-motor-und-sport.de/for ... antworten/

If he's employed on a consultancy contract then he's not a top 3 salary because they are people employed by the team.

If they off-book him for taxation purposes (which is why he'll be a contractor) then he's off-book for the FIA's purposes as well. Simple really.

If the point of contention is his salary then that's a big figure overspend - Newey will be on multiple millions which means the FIA have found them to multiple millions overspent. If that's the case, that's going to cause waves amongst the other teams.

Red Bull is claiming he is "one of the top 3" and should be excluded. It's not like, he is top 3 + 1 excempted. Let's say he is being paid 4 millions and Red Bull reported they are under 2 million, assuming he is part of excempted 3. FIA is saying, nope, you add those 4 millions to budget and they go over by 2 millions. Why is this going to cause waves amongst other teams? They also have highly paid top 3 excempted. Problem is, the way the employment contract structure of Newey. FIA thinks he is not an employee and Red Bull think he is.

[Just_a_fan]

According to sources, the point of contention is how Adrian Newey is on the payroll.
According to Red Bull, he is 1 of the three big earners, however, according to the FIA, he is a so-called ZZP-er.
(self-employed without staff)
In fact, Newey is affiliated with Red Bull on a consultancy contract.

A German source AMuS.

https://www.auto-motor-und-sport.de/for ... antworten/

If he's employed on a consultancy contract then he's not a top 3 salary because they are people employed by the team.

If they off-book him for taxation purposes (which is why he'll be a contractor) then he's off-book for the FIA's purposes as well. Simple really.

If the point of contention is his salary then that's a big figure overspend - Newey will be on multiple millions which means the FIA have found them to multiple millions overspent. If that's the case, that's going to cause waves amongst the other teams.

Red Bull is claiming he is "one of the top 3" and should be excluded. It's not like, he is top 3 + 1 excempted. Let's say he is being paid 4 millions and Red Bull reported they are under 2 million, assuming he is part of excempted 3. FIA is saying, nope, you add those 4 millions to budget and they go over by 2 millions. Why is this going to cause waves amongst other teams? They also have highly paid top 3 excempted. Problem is, the way the employment contract structure of Newey. FIA thinks he is not an employee and Red Bull think he is.

It creates waves because it allows Red Bull to spend the 2 million difference on the car. That's the whole point of the thing!

If Newey is off-book for taxation purposes (as he may well be) then the team can't claim him to be one of the special "expensive employees" because he is not an employee. An employee has specific attributes, rights, etc., that an off-book worker doesn't. HMRC will be very interested if Red Bull claim he's an employee when they have been paying him off-book.

[mendis]

If he's employed on a consultancy contract then he's not a top 3 salary because they are people employed by the team.

If they off-book him for taxation purposes (which is why he'll be a contractor) then he's off-book for the FIA's purposes as well. Simple really.

If the point of contention is his salary then that's a big figure overspend - Newey will be on multiple millions which means the FIA have found them to multiple millions overspent. If that's the case, that's going to cause waves amongst the other teams.

Red Bull is claiming he is "one of the top 3" and should be excluded. It's not like, he is top 3 + 1 excempted. Let's say he is being paid 4 millions and Red Bull reported they are under 2 million, assuming he is part of excempted 3. FIA is saying, nope, you add those 4 millions to budget and they go over by 2 millions. Why is this going to cause waves amongst other teams? They also have highly paid top 3 excempted. Problem is, the way the employment contract structure of Newey. FIA thinks he is not an employee and Red Bull think he is.

It creates waves because it allows Red Bull to spend the 2 million difference on the car. That's the whole point of the thing!

It regardless has created ripples already and don't take the 2 million seriously as that is just an arbitery number. Question is, if that is indeed a problem, does Red Bull have someone else that is being paid in a couple of millions, who is currently not part of top 3 paid. If yes, then they can readjust their top 3, rework the reports and resubmit. Then take Newey's payment into cost cap and they should be fine. They will be liable for procedural beach. I know this sounds naive.

[Just_a_fan]

Red Bull is claiming he is "one of the top 3" and should be excluded. It's not like, he is top 3 + 1 excempted. Let's say he is being paid 4 millions and Red Bull reported they are under 2 million, assuming he is part of excempted 3. FIA is saying, nope, you add those 4 millions to budget and they go over by 2 millions. Why is this going to cause waves amongst other teams? They also have highly paid top 3 excempted. Problem is, the way the employment contract structure of Newey. FIA thinks he is not an employee and Red Bull think he is.

It creates waves because it allows Red Bull to spend the 2 million difference on the car. That's the whole point of the thing!

It regardless has created ripples already and don't take the 2 million seriously as that is just an arbitery number. Question is, if that is indeed a problem, does Red Bull have someone else that is being paid in a couple of millions, who is currently not part of top 3 paid. If yes, then they can readjust their top 3, rework the reports and resubmit. Then take Newey's payment into cost cap and they should be fine. They will be liable for procedural beach. I know this sounds naive.

I don't think it will be that simple for them and nor should it be. If they spent the money on the car because they off-booked a major salary then that can't be unspent just by changing an employment title.

It appears to have been a deliberate move and thus should be dealt with properly i.e. punished.

[Shakeman]

I wonder what Mr Neweys salary is then......

Up to 5% of the budget cap?

[mendis]

It creates waves because it allows Red Bull to spend the 2 million difference on the car. That's the whole point of the thing!

It regardless has created ripples already and don't take the 2 million seriously as that is just an arbitery number. Question is, if that is indeed a problem, does Red Bull have someone else that is being paid in a couple of millions, who is currently not part of top 3 paid. If yes, then they can readjust their top 3, rework the reports and resubmit. Then take Newey's payment into cost cap and they should be fine. They will be liable for procedural beach. I know this sounds naive.

I don't think it will be that simple for them and nor should it be. If they spent the money on the car because they off-booked a major salary then that can't be unspent just by changing an employment title.

It appears to have been a deliberate move and thus should be dealt with properly i.e. punished.

Oh you can rework the expense invoices and resubmit. It's part of process in many countries. If they have already shown invoices, reclassifying them isn't a problem. There is no "unspent" here. You absorb Newey's salary into cost cap and as one of the top 3 paid is now open, move one if the highest paid up to fill the spot.

[mendis]

Best thing on Internet today.

[DChemTech]

I wonder what Mr Neweys salary is then......

Up to 5% of the budget cap?

Or five dollars over. Nothing has been stated about the magnitude of the breach, except that it is within 5%. Nor has it been stated that it's indeed Newey's salary that is an issue. All rumours and speculation,thanks to the FIA not actually communicating what is going on.

[Just_a_fan]

It regardless has created ripples already and don't take the 2 million seriously as that is just an arbitery number. Question is, if that is indeed a problem, does Red Bull have someone else that is being paid in a couple of millions, who is currently not part of top 3 paid. If yes, then they can readjust their top 3, rework the reports and resubmit. Then take Newey's payment into cost cap and they should be fine. They will be liable for procedural beach. I know this sounds naive.

I don't think it will be that simple for them and nor should it be. If they spent the money on the car because they off-booked a major salary then that can't be unspent just by changing an employment title.

It appears to have been a deliberate move and thus should be dealt with properly i.e. punished.

Oh you can rework the expense invoices and resubmit. It's part of process in many countries. If they have already shown invoices, reclassifying them isn't a problem. There is no "unspent" here. You absorb Newey's salary into cost cap and as one of the top 3 paid is now open, move one if the highest paid up to fill the spot.

Reworking expenses might be allowed by taxation authorities but is it allowed in the budget cap?

It's interesting to look at Red Bull's accounts. For the year ending 31 December 2020, they had 59 employees. 2 in administration, 57 in racing and production. With a wage bill of just under £10m. S'funny, but I'm sure RBR must have more people working for them than 59. No doubt the rest are off-book. If so, that allows the team to say "they're not a cost under the budget cap" according to RBR's logic shown with Newey's salary.

That opens an interesting question: if a team gets rid of all its employees and then buys their expertise in as contractors, can they then spend the entire $145m on the car each year? Now that would be a heck of a spend, wouldn't it?