2021 Cost Cap Rumours and Speculation

[bonjon1979]

https://racingnews365.com/red-bull-in-t ... budget-cap

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I would also draw attention to the fact that Marko said that they have six points where they are in disagreement with the FIA - he also said, and I quote '...nothing has come back yet. If these points, six in total, if only two are tken into account, then we are under the budget cap, even massively.'

These are his words, not mine, and if he's being honest - if two of their points would bring Red bull massively under the budget cap, then the inverse must also be true. Ie that at the moment, they are massively over the budget cap. It also stinks to high heaven - no way would they be massively under the budget cap by design. They would've spent everything they could - so if they had all this headroom? Why didn't they use it? It's obvious to me from this statement that they've tried to fiddle this after they realised they were going over.

It's the only explanation.

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Is it?

Why are you quoting words from an old interview, from before the FIA came with their statement?
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Red Bull: 'Some points interpreted differently by FIA'
2 October - 13:04

Speaking to the German branch of Sky Sports, Marko reveals that there are "no concrete figures" yet. "From our point of view, there are some points where we see the situation differently from the FIA in terms of interpretation. And that has to be discussed," the Red Bull adviser indicated.

He continued: "We have issued a statement. Nothing has come back yet. If these points, six in total, if only two are taken into account, then we are under the budget cap, even massively. So what's floating around is complete nonsense."

Ahead of the Japanese Grand Prix, the FIA will announce the outcome of the investigation.

It doesn't matter when he said it, the facts remain the same.

[Wil992]

Does the above enlarged text imply that the person has to be an employee? An employer's social security payments would only be paid for an employee. Unless it means that if the excluded person is a company then the payments they make to their own employee. That's one for the lawyers to thrash out.

No, it doesn’t imply that.
It means that, for example, as a uk employee then an individual’s employer would have pay employer’s national insurance payments and that those national insurance payments can be included in the exclusion even though they’re going to the government not the individual.

If the individual in question is not an employee then that payment may not arise and therefore may not be relevant. Clearly not every clause in the exclusions would apply to every individual.

As I’ve also already said, in the uk an employees social security costs are also paid if the individual is a contractor. If you don’t believe this I’ll show you my pay slip showing a deduction for employers NI, despite the fact that I’m not an employee.

[Just_a_fan]

Does the above enlarged text imply that the person has to be an employee? An employer's social security payments would only be paid for an employee. Unless it means that if the excluded person is a company then the payments they make to their own employee. That's one for the lawyers to thrash out.

No, it doesn’t imply that.
It means that, for example, as a uk employee then an individual’s employer would have pay employer’s national insurance payments and that those national insurance payments can be included in the exclusion even though they’re going to the government not the individual.

If the individual in question is not an employee then that payment may not arise and therefore may not be relevant. Clearly not every clause in the exclusions would apply to every individual.

As I’ve also already said, in the uk an employees social security costs are also paid if the individual is a contractor. If you don’t believe this I’ll show you my pay slip showing a deduction for employers NI, despite the fact that I’m not an employee.

It does rather depend on how your contracts are set up, I believe (it's been a while since I worked as a contractor).

[Wil992]

Does the above enlarged text imply that the person has to be an employee? An employer's social security payments would only be paid for an employee. Unless it means that if the excluded person is a company then the payments they make to their own employee. That's one for the lawyers to thrash out.

No, it doesn’t imply that.
It means that, for example, as a uk employee then an individual’s employer would have pay employer’s national insurance payments and that those national insurance payments can be included in the exclusion even though they’re going to the government not the individual.

If the individual in question is not an employee then that payment may not arise and therefore may not be relevant. Clearly not every clause in the exclusions would apply to every individual.

As I’ve also already said, in the uk an employees social security costs are also paid if the individual is a contractor. If you don’t believe this I’ll show you my pay slip showing a deduction for employers NI, despite the fact that I’m not an employee.

It does rather depend on how your contracts are set up, I believe (it's been a while since I worked as a contractor).

No, it doesn’t. Purely in terms of current uk tax law, which is what would determine whether RB would pay employers NI for newey, all payments for services are deemed as subject to employment taxes unless you can prove that you are not under the supervision, direction and control of the paying organisation. How the contract is set up is no longer relevant. If it’s been a while since you worked this way, things have changed a lot since 2017. Essentially if hmrc decide you are doing something as an avoidance scheme, they can claim the payments regardless.

So, to my original point, the payment of employers NI means nothing wrt someone’s employment status and is completely irrelevant to this discussion.

[ringo]

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."

It is cheating. Newey has a bigger impact on the car than any other person in that team.
I see your point in that its just a matter of wording but it is not. The intent to juggle was planned and the team knows they need Newey burning the midnight oil to develop their cars.
Its imperitive for them to have him both on staff and maybe as a contractor to spread costs.

But the plot thickens. I am now reading about empoyees on holiday and being sick and their compensation adjusted because of this.. It's very wild. And shows the team really knows how push the limits with everything.

[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."

.
It is cheating. Newey has a bigger impact on the car than any other person in that team.
I see your point in that its just a matter of wording but it is not. The intent to juggle was planned and the team knows they need Newey burning the midnight oil to develop their cars.
Its imperitive for them to have him both on staff and maybe as a contractor to spread costs.

But the plot thickens. I am now reading about empoyees on holiday and being sick and their compensation adjusted because of this.. It's very wild. And shows the team really knows how push the limits with everything.

.
If this is cheating, can you explain to me why Newey has been working in this way for RBR since mid 2006, through his own company
as a contractor and not only since 2021, the year of the Budgetcap?

[Wil992]

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If this is cheating, can you explain to me why Newey has been working in this way for RBR since mid 2006, through his own company
as a contractor and not only since 2021, the year of the Budgetcap?

It doesn’t matter why he’s been working that way. Probably in 2006 it was for tax reasons, things have changed a lot since then, so that probably doesn’t apply any more, but if that’s how they’ve always worked, there’d be no specific reason to change now. I imagine there are dozens of people up and down the paddock doing the exact same thing.

But what does matter is that the word employee does not appear once in the definition of who can be excluded as a top 3 earner. It’s an individual or a connected party (eg a personal service company). So there can be no meaningful debate about whether he’s an employee or not for the purposes of exclusion. Because it’s not relevant.

[Just_a_fan]

No, it doesn’t imply that.
It means that, for example, as a uk employee then an individual’s employer would have pay employer’s national insurance payments and that those national insurance payments can be included in the exclusion even though they’re going to the government not the individual.

If the individual in question is not an employee then that payment may not arise and therefore may not be relevant. Clearly not every clause in the exclusions would apply to every individual.

As I’ve also already said, in the uk an employees social security costs are also paid if the individual is a contractor. If you don’t believe this I’ll show you my pay slip showing a deduction for employers NI, despite the fact that I’m not an employee.

It does rather depend on how your contracts are set up, I believe (it's been a while since I worked as a contractor).

No, it doesn’t. Purely in terms of current uk tax law, which is what would determine whether RB would pay employers NI for newey, all payments for services are deemed as subject to employment taxes unless you can prove that you are not under the supervision, direction and control of the paying organisation. How the contract is set up is no longer relevant. If it’s been a while since you worked this way, things have changed a lot since 2017. Essentially if hmrc decide you are doing something as an avoidance scheme, they can claim the payments regardless.

So, to my original point, the payment of employers NI means nothing wrt someone’s employment status and is completely irrelevant to this discussion.

Do you have your own limited company or do you contract via an agency or through an umbrella company?

[Wil992]

Do you have your own limited company or do you contract via an agency or through an umbrella company?

In the last 12 months i've done all of the above, because i've been working in Stuttgart, Copenhagen and Blackburn. So for Germany and Denmark I use my Ltd co, but for UK work i've been forced to use an umbrella as the payer insists on this for tax purposes (for uk tax, it is now the responsibility of the beneficial client to ensure the correct tax is paid on the money they pay me, so they insist on an umbrella org from an approved list that runs payroll before i get the cash, that way they can't be billed later by hmrc).

[dans79]

Jesus. It's sounds like the uk tax system is even more screwed up than the one we have hear in the States.

[Sieper]

To all the people driving the point that Newey's costs can't be excluded as 1 of the 3 highest payed Redbull staff

Newey has been instrumental to RB's car development. These kind of guys ARE EXACTLY what was meant when this exclusion rule was thought of. If you have some kind of supertalent doing work for you, you are allowed to exclude 3 of these from the cost cap. When I read that rule the first I thought about were Newey, Allison, Key etc.

[ringo]

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."

.
It is cheating. Newey has a bigger impact on the car than any other person in that team.
I see your point in that its just a matter of wording but it is not. The intent to juggle was planned and the team knows they need Newey burning the midnight oil to develop their cars.
Its imperitive for them to have him both on staff and maybe as a contractor to spread costs.

But the plot thickens. I am now reading about empoyees on holiday and being sick and their compensation adjusted because of this.. It's very wild. And shows the team really knows how push the limits with everything.

.
If this is cheating, can you explain to me why Newey has been working in this way for RBR since mid 2006, through his own company
as a contractor and not only since 2021, the year of the Budgetcap?

Redbull should have changed their business structure like most of the teams did. Many had to restructure to increase efficiency of labour for the cost cap to work.
Whatever was the case before had nothing to do with a expediture target. Now that we have a budget cap.. the team did what it did so that part of newey's costs would not be counted.
But this is inherently unfair.
1000 hours of Newey design for example may be all you can get under the cap..
But now we have 2000 hours of Newey albeit under a different hat.
That's the crux of the matter. The car recieved 2000hrs of newey's hand when it should not have.
And I am just using these numbers for illustration and also assuming Newey wad the issue. For all we know he may not be.

[codetower]

How does this work then? If I own a racing company, and Ferrari hires me as an employee paying me 30Mil per year. I use part of my 30m to develop and test F1 parts and technology for my company. I use that knowledge to help aid Ferrari. Ferrari doesn't directly pay my company. Can they exclude that 30m as a top 3 hire, and basically avoid that expense from the cap?

[DChemTech]

To all the people driving the point that Newey's costs can't be excluded as 1 of the 3 highest payed Redbull staff

Newey has been instrumental to RB's car development. These kind of guys ARE EXACTLY what was meant when this exclusion rule was thought of. If you have some kind of supertalent doing work for you, you are allowed to exclude 3 of these from the cost cap. When I read that rule the first I thought about were Newey, Allison, Key etc.

Sure, but then the problem is whether it depends on contract structure if Newey is considered as RB staff or not, which could be a source of disagreement between RB and FIA (and exactly one of those fields where 'cheating' may be a bit harsh, and where it may not be the case that RB 'spent more on car development than others' - it may be that other teams spent the same, but because of different contractual setups, things count differently to the cap).

Now, I have not followed that discussion up here because that all seems a bit preliminary - we do not know if this is the nature of the issue, after all, so it's all speculation.

[Just_a_fan]

Do you have your own limited company or do you contract via an agency or through an umbrella company?

In the last 12 months i've done all of the above, because i've been working in Stuttgart, Copenhagen and Blackburn. So for Germany and Denmark I use my Ltd co, but for UK work i've been forced to use an umbrella as the payer insists on this for tax purposes (for uk tax, it is now the responsibility of the beneficial client to ensure the correct tax is paid on the money they pay me, so they insist on an umbrella org from an approved list that runs payroll before i get the cash, that way they can't be billed later by hmrc).

Yes, an umbrella co approach will always end up with NI being taken. I had to work through an umbrella co. years ago. Made things easy for me, certainly, but not as lucrative as a Ltd Co. I now do something else and have my own Ltd Co with a decent accountant.

I bet Newey does his stuff via a Ltd Co and has it set up in ways that limit his liability.