The Red Bull Formula 1 team’s breach of the cost cap regulations totaled about $1.8 million and was spread across four main areas, RacingNews365.com understand.
A recent report from the FIA auditing process for the 10 teams accounts for 2021 found that nine of them had stayed under the $145 million cost cap imposed – with only Red Bull going over, committing a so-called “minor” breach.
Team boss Christian Horner said in Singapore when rumors first started that his squad had not broken the cost cap, but just an hour after Max Verstappen won the 2022 Drivers’ title in Japan, Horner received a phone call to confirm that the breach was made.
RacingNews365.com believe that this call was made by Shaila-Ann Rao – the FIA’s interim secretary-general for motorsport – and former Mercedes general counsel.
The following day, news of the breach was publicized (along with a procedural, paperwork breach from Aston Martin).
It is understood by RacingNews365.com that the FIA are believed to have made Red Bull an offer to settle the breach – under the terms of an Accepted Breach Agreement.
This would mean Red Bull plead guilty and cannot appeal, but they are able to take the case to an Adjudication Panel if they turn down the ABA for a final ruling on the matter.
Red Bull cost cap breach
Red Bull were initially well within the cost cap figure of $145 million by about $4 million before multiple factors combined to push them $1.8 million over, according to RacingNews365.com’s sources.
- Internal costs related to gardening leave and sick pay – $800k
- Catering costs – $1.2 million
The other areas that pushed the team over the cap included the use of spare parts and a tax situation with UK authorities which meant the team went from $4 million under to $1.8 million over – a swing of about $5.8 million it is understood.
The internal costs are said to involve former head of aerodynamics Dan Fallows, who resigned in mid-2021 to take up the technical director job at Aston Martin, according to RacingNews365.com’s source.
As is normal in cases of personnel moving between teams, he went on a period of gardening leave, although the well-placed source understands that Fallows was moved across to the Red Bull Advanced Technologies branch of the business – away from the racing entity.
Red Bull Racing did not factor Fallows into their calculations it is believed, while the FIA did.
The rest of the costs were allocated to standard sick pay for team personnel.
RacingNews365.com also understands that a chunk of the overspend was caused by spare parts and a rules re-classification on them.
Parts designed for the 2021-spec of cars that could not be carried over to the new breed were previously exempt, but in June of this year, the rule was changed so these parts were included in the total budget.
The catering costs added up to $1.2 million of the total overspend, with other minor expenses pushing the total towards the cap limit.
Despite rumors to the contrary, Adrian Newey’s salary is not understood to be a reason for the breach.
Newey’s salary is believed by sources familiar with the matter to be exempt from counting towards the cost cap as it is one of the top three highest earners in the team.
Tax situation fluid
The largest chunk of the overspend is believed by RacingNews365.com to relate to potential tax credits and reimbursements from the United Kingdom tax authorities – His Majesty’s Revenue and Customs (HMRC).
Known as Research and Development Expenditure Credit (RDEC), it can be claimed bys who have been hired by a larger firm for R&D work and have either received a grant or subsidy or the expenditure is greater than an aid cap on the contractor scheme.
Calculated at 13% of qualifying R&D expenditure, some of the credit is able to be used to get rid of some tax liabilities.
Red Bull are believed to have expected a rebate from HMRC, but this did not materialise, adding the $1.4 million to the budget for the year.
However, RacingNews365.com understands that the situation is fluid and if Red Bull are able to prove they were expecting some sort of rebate from HMRC, the FIA will look leniently on this figure.
Horner is due in the Team Principals’ press conference on Saturday morning at the United States Grand Prix – where talks with the FIA are ongoing to reach some kind of settlement.
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