Red Bull Formula 1 team's violation of the cost cap regulations totaled approximately $1.8 million and was spread across four major areas.
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The Red Bull Formula One team’s violation of the cost cap regulations totaled approximately $1.8 million and was spread across four major areas. According to a recent report from the FIA auditing process for the ten teams’ accounts for 2021, nine of them stayed under the $145 million cost cap imposed – with only Red Bull going over, committing a “minor” breach. RacingNews365.com understands that the FIA has made Red Bull an offer to settle the breach under the terms of an Accepted Breach Agreement. This means Red Bull pled guilty and cannot appeal, but they can take the case to an Adjudication Panel if they reject the ABA’s final ruling.
When the rumors first surfaced, team manager Christian Horner claimed in Singapore that his team had not exceeded the cost cap. However, an hour after Max Verstappen claimed the 2022 Drivers’ title in Japan, Horner received a call confirming that the breach had occurred. According to RacingNews365.com, this decision was made by former Mercedes general counsel Shaila-Ann Rao, who is currently serving as the FIA’s interim secretary-general for motorsport. News of the breach was made public the next day (along with a procedural, paperwork breach from Aston Martin).
According to sources at RacingNews365.com, Red Bull was initially $1.8 million under the cost cap of $145 million before a number of factors combined to push them over. These comprised Internal expenses for paid time off for gardening and sick leave: $800k. While $1.2 million was spent on catering. The team also went from being $4 million under the cap to being $1.8 million over it due to the use of spare parts and a tax dispute with UK authorities, a swing of about $5.8 million it is believed.
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According to a source at RacingNews365.com, the internal costs include former head of aerodynamics Dan Fallows, who resigned in mid-2021 to take the technical director job at Aston Martin. He took gardening leave, as is customary when personnel are transferred between teams, but according to a reliable source, Fallows was transferred to the Red Bull Advanced Technologies division of the company, which is separate from the racing division. It is believed that Red Bull Racing did not include Fallows in their calculations, whereas the FIA did. The remainder of the budget was set aside for standard sick leave for team members. RacingNews365.com also understands that spare parts and a rule re-classification on them contributed to some of the overspend.
Parts designed for 2021-spec cars that could not be carried over to the new breed were previously exempt, but the rule was changed in June of this year so that these parts were included in the budget total. Catering costs accounted for $1.2 million of the total overspend, with minor expenses pushing the total close to the cap limit. Despite rumours to the contrary, Adrian Newey’s pay is not thought to be a factor in the breach. According to sources familiar with the situation, Newey’s salary is exempt from counting toward the cost cap because he is one of the team’s top three earners.
According to RacingNews365.com that the majority of the overspend is related to potential tax credits and reimbursements from the United Kingdom tax authorities – His Majesty’s Revenue and Customs (HMRC). It is known as Research and Development Expenditure Credit (RDEC), and it can be claimed by contractors who have been hired by a larger firm for R&D work and have either received a grant or subsidy, or the expenditure exceeds the scheme’s aid cap. Some of the credit, calculated at 13% of qualifying R&D expenditure, can be used to offset some tax liabilities. Red Bull was expected to receive a rebate from HMRC, but this did not occur, adding $1.4 million to the company’s budget for the year.
However, the situation is fluid, and if Red Bull can demonstrate that they were expecting a rebate from HMRC, the FIA will be more lenient on this figure. Horner is scheduled to speak at the Team Principals’ press conference at the United States Grand Prix on Saturday morning, where negotiations with the FIA are ongoing.
