2021 Cost Cap Rumours and Speculation

[pob]

If I remember rightly, when the cost cap was being designed it was originally only the top earner who was to be exempt, and this was expanded to the top 3 earners at Red Bull's suggestion, presumably with Adrian Newey in mind.

[tpe]

Next, it’s not correct that an employer wouldn’t pay these for a contractor. Since the introduction of IR35 regulations the employer is responsible for all employment costs arising, regardless of the use of personal service companies. So any such costs would be included in this exemption.

That doesn’t even slightly imply that the whole paragraph relates only to employees. In fact I’d hazard a guess that the word employee has deliberately been omitted from the wording because it muddies the water. It’s an individual, or a connected party, that’s all, regardless of employment status.

How IR35 is related to an international sport?
I mean, do they provision the relevant tax/employment laws that exist in Switzerland? Or Italy?

Why is the UK laws involved in this discussion? Is there a provision in the rules that any dispute will be ruled by UK courts/laws?

It was a specific response to a specific point. Someone stated that if a company is paying “social security payments” for an individual, that means they are definitely an employee. IR35 means that’s not correct, according to the laws of the country in which RB operates its f1 team and which newey is resident for tax purposes. That’s all.

Yes, but is that taken into account in the cost cap rules? Or do they have their own definitions?

[tpe]

I think its a stain if the FIA doesnt do sonething.
If they do the sport cannot be stained for a participants actions. It's like ferrari and their cheat engine. F1 is not stained for punishing them. The FIA cannot control the actions of the teams. So i dont think a team can damage the image of the sport. Only if that team's influence warps of twists the prescribed actions.

The FIA has clear options in dealing with the breach as listed in their regs. They run the risk of being stained if they sweep it under the rug or create a new penalty that downplays the breach.
Toto will stick on this case however. He let the FIA slide last year by not appealing the outcome, i dont think he will shoe mercy a second time for the second time he lost out the sport.

This is correct as matter Ferrari but we saw that there was a punishement at least for them on the following years. We will see the same now?

FIA already said in the announcement, no. They way They say it's 1st year blah blah; screams a lightweight punishment.

[Wouter]

The whole discussion here is now about the report from AMuS that RBR has crossed the BC 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 BC.
RBR says he is an employee and has therefore placed his costs with the three highest-earning employees and they are not counted in the BC.

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 is an employee of that large company.

From an RBR perspective they are right and he is an RBR employee, but the FIA ​​maintains that he is not an RBR employee as he is not on their payroll but they pay his monthly bills.

This isn't about a lopehole, 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."

[mwillems]

A lot of effort was placed in this thread to classify Newey and others. But it doesnt matter what he is classified, employee or contractor through his company.
The spend was recorded and Newey's services durirectly relate to developing the F1 car.

So if he is on staff and gets 3 mil to do aero work.. but his company is getting 10 mil for chassis work.. it doesnt matter, that's 13 million spent towards the car. And it wont be "off book".
If that 10 mil was off book and "racing services" donated free manhours to development ( but behind the scenes a sponsor paid 10 mil to newey company) ... then that will raise a red flag. And its still cheating. Redbull cannot juggle that and reclassify and then be okay.

The car, the cad files, the manufacturing hours run, the contractor invoices and purchase orders, their pay roll even if its from a red bull sponsor, the update parts, are their own evidence that 152 million was spent. Redbull just met their match in terms of the calibre of auditor that the FIA hired.

The funny thing is.. i suspect Redbull had a majof breach and the FIA turned it into minor so as to try and save Max's title.
The orange army will be livid and leave the sport if F1 loses all those millions of dutch viewers.
But then again.. maybe they will support Max evrn harder next year if they feel wronged.
Another view is the fanbase blaming Redbull for poorly managing Max's career with that budget blunder.
Interesting and critical times ahead!

Unless you can prove intent it isn't cheating, as much as you want it to be. I don't like RB and I don't trust them, think they always push too far and win at any cost, for me it is ugly winning and when you put it all together, I don't see Max as last years champion.

But I am aware of my bias and I know that these feelings don't become facts and I have no proof they deliberately cheated. Rumours can't be used to back up my bias and we don't know yet what has happened other than they overspent and that they will find it almost impossible to prove they didn't gain an advantage from overspending.

[SiLo]

He's a consultant, not an employee. Literally a contractor/purchased service. I work with people like this all the time and they are not considered employees because they receive none of the employee benefits.

Surely, he is an employee of his own company and is contracted to do work for RBR?

[Quantum]

The whole discussion here is now about the report from AMuS that RBR has crossed the BC 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 BC.
RBR says he is an employee and has therefore placed his costs with the three highest-earning employees and they are not counted in the BC.

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 is an employee of that large company.

From an RBR perspective they are right and he is an RBR employee, but the FIA ​​maintains that he is not an RBR employee as he is not on their payroll but they pay his monthly bills.

This isn't about a lopehole, 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."

If this is a "defence" then I can only facepalm the attempt.

They took Newey and pawned him into a budget cap token, wittingly too.
That is still cheating and attempting to cheat the system. 9 other teams got it right, if there was a grey area in this then we would see more teams falling foul of it.

Trying to redux the narrative to make this look ok is utterly farcical.

[bonjon1979]

The whole discussion here is now about the report from AMuS that RBR has crossed the BC 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 BC.
RBR says he is an employee and has therefore placed his costs with the three highest-earning employees and they are not counted in the BC.

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 is an employee of that large company.

From an RBR perspective they are right and he is an RBR employee, but the FIA ​​maintains that he is not an RBR employee as he is not on their payroll but they pay his monthly bills.

This isn't about a lopehole, 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."

I would be utterly flabergasted if Adrian Newey has no employees of his company apart from himself or has not paid for other people to work with/for him in whatever capatcity. Even if he has a personal assistant/ if he has an accountant. Then you are trying to include multiple peoples services within the one person who is in your three exemptions from the budget cap. We shall see but IF Red Bull are trying to say that a hired company can count as an employee whose salary can be written off as one of the big three, then it's a ludicrous argument. It's also worth pointing out that everyone waxes lyrically about how Adrian Newey is the genius behind the Red Bull car. If the overspend has come about because they fiddled his employment then that is really significant in my mind.

[kalinka]

One thing I know I don't want to see at the end of this case > Another "confidential agreement" between RBR and the FIA ( like the Ferrari deal regarding their engine being illegal )...unfortunately, guessing by the lack of transparency since the whole cashgate started...I fear it may be the final outcome.

[SiLo]

It's going to set a terrible precedent if they allow it. Imagine all the people suddenly being "employees" but actually working for another firm that are effectively outside of the remit of the FIA.

[Sieper]

well, you can only use 3 excempt employees.

[Shakeman]

It's going to set a terrible precedent if they allow it. Imagine all the people suddenly being "employees" but actually working for another firm that are effectively outside of the remit of the FIA.

Precisely my point from yesterday. The logical conclusion from this is a total unworkable mess where the system is completely gamed by teams. If these 'separate companies' are also conducting their own R&D outside of the cost cap and then you might as well not have a cost cap. Imagine those 'separate companies' also having secondary funding streams for suspiciously similar work that could be fed into the F1 development work for a discounted fee. Who's to say what an external company can and can't work on and who's to say what IP came from where?

The barrier to setting up yourself as an aero consultant is very low, no different to me working as a freelance 3d artist using the cloud to render animations. An external aero consultant could easily work from home and spin up an AWS instance for the heavy lifting.

Surely, one cannot simply decide for tax efficiency's sake to be an external contractor then in the next breath for sporting regs expedience become an employee. This would be the view of HMRC I'm sure. (UK tax office). However, I wonder if the Uber case in the UK case could be used as a counter argument? That was about self-employed people being treated as employees.

I don't think too many people believe the FIA is going to come down heavy on this, a slap on the wrists and a non-penalty so the discussion is effectively moot anyway but the implications could be significant.

[mendis]

It's going to set a terrible precedent if they allow it. Imagine all the people suddenly being "employees" but actually working for another firm that are effectively outside of the remit of the FIA.

Regulations doesn't necessarily say, ONLY EMPLOYEES are allowed to be in the group of 3 excluded from the cost cap.

https://www.fia.com/sites/default/files ... -02-18.pdf

3. EXCLUSIONS
3.1 In calculating Relevant Costs, the following costs and amounts within Total Costs of the Reporting Group must be excluded ("Excluded Costs"):

(a) All costs Directly Attributable to Marketing Activities;

(b) All costs of Consideration provided to an F1 Driver, or to a Connected Party of that F1 Driver, in exchange for that F1 Driver providing the services of an F1 Driver to or for the benefit of the F1 Team, together with all travel and accommodation costs in respect of each F1 Driver;

(c) All costs of Consideration provided to an Other Racing Driver, or to a Connected Party of that Other Racing Driver, in exchange for that Other Racing Driver providing the services of an Other Racing Driver to or for the benefit of the F1 Team, together with, all travel and accommodation costs in respect of each Other Racing Driver;

(d) All costs of Consideration provided to the three individuals (other than any individual in respect of whom all costs of Consideration are excluded pursuant to any other subArticle of this Article 3.1) in respect of whom the highest aggregate amount of Consideration has been recognised in Total Costs of the Reporting Group during the Reporting Period (the "Excluded Persons"), or to a Connected Party of any Excluded Person, in each case in exchange for that Excluded Person providing services to or for the benefit of the F1 Team, together with associated employer’s social security contributions and all travel and accommodation costs in respect of each Excluded Person;

To simply, cost cap allows the exclusion of driver payments where a driver can be an employee or a contractor from another firm who lends driving services to any F1 team. The fees for his services paid to his employer if he is a contractor, is excluded.

Same thing applies to anyone providing service to the F1 team, whether an employee or a contractor from another firm. In this case, Newey. This person(s) can be put into the group of 3 excluded, other than drivers.

How can such a straight forward statement be ambigous?

[TimW]

Since Adrian Newey races cars himself, why not list him as an 'Other Racing Driver'

BTW I understand that the whole discussion about Newey here is based on the AMUS article that he is rumored not be one of the three exempts. The same article quotes RB saying that this is not true, and that Newey is one of the three:

"Red Bull bestreited die Gerüchte. Newey gehöre zu den drei Topverdienern - und ist damit vom Budget Cap ausgenommen"

[mendis]

Since Adrian Newey races cars himself, why not list him as an 'Other Racing Driver'

Perfectly possible to put him as a Sim Driver and classify in 'Other Racing Driver' group!