'FIA to close budget cap loophole used by Red Bull and other top teams'
The FIA want to be even stricter in enforcing the budget cap from 2026. Big teams have seemingly used a loophole to hire more people. From 2026, the FIA want to close this loophole.
Formula 1 has been working with a budget cap since 2021. This cost cap is supposed to ensure that all teams spend the same amount of money and, therefore, will come closer together in terms of performance in the long run. Yet this does not quite appear to be working to perfection. An aim was for teams to become smaller. This is far from the case.
In fact, according to Auto, Motor und Sport, F1 teams are only getting bigger. An F1 team boss reveals to the German Medium that the top teams now consist of 1,500 people, whereas before the budget cap, it was 1,000. So, how is it that teams keep growing despite the budget cap?
How Red Bull and other top teams get around the budget cap
A major reason is part-time projects. Important and therefore expensive staff are put on different projects by teams. For example, Rob Marshall (now working at McLaren) would have been on Red Bull's books for 50 per cent on the RB17 Hypercar, 40 per cent on Red Bull Powertrains and only 10 per cent with the F1 team. As a result, Red Bull 'only' had to put ten per cent of his wages on the books for the F1 team.
In this way, more and more personnel are deployed across different projects, and thus, more and more big teams are also choosing more projects to keep their expensive employees happy. For the FIA, it is almost impossible to check exactly whether the percentages on the books are really the percentages an employee spends on that project. This should change in 2026.
From 2026, the FIA wants to introduce that 100 per cent of an employee's salary counts towards the budget cap. So, even if someone only works 10 per cent, 100 per cent of their wages must be included in the budget cap. The FIA wanted to introduce this before with Technical Directive 045, but not enough teams reportedly voted for it. In 2026, however, the FIA can push this through.
There is simply no way how this can fully be closed and policed. The companies involved are huge and are no dummies. They know how to get around things financially, either for taxes or otherwise. These are globally operating companies with insane revenues. It would be extremely stupid to think you will be able to police that fully. Like others mentioned, it could even be a way of getting more things done with more (but proportionally less) resources. Being more effective. With as a nice bonus a way to reduce the costs. Let alone the constructs you could do on contracts with bonusses, shares and so on. You are now basically going to say that if someone is giving advise through a single session (as an exaggeration), his year salary should be included, even if he did not put the hours of work needed to reflect that. Hardly makes sense, but I understand their attempt to close the loopholes. They are much better off understanding they will not outsmart the big companies with their army of accountants and lawyers though. Hell, these teams make a living off finding every loophole they can find on any written regulation they put forward. The cost cap made sense from a theoretical point of view. The world is however far more complex than that. I think it is even easier to police if you restrict the manufacturing capabilities, like the ability to build parts. As you already restrict the CFD and windtunnel time, it is the last part where costs are made which can highly influence the costs and performance can be gained. Whatever that then may costs is up to the teams.
Good comment Japiek. I agree with you and the only way to sort it out is to simplify the system. The more complex the cost cap statutes are, the easier it is for legal and accounting minds to find loopholes!
It's simple really. Only allow people who are employed full time to be involved in a team. No contractor, consultancy or advisory positions should be allowed unless there salaries are part of the cost cap. Also, the top 3 earners should fall under the cost cap as well. I mean Redbull employing Newey, who is an engineering genius, yet as far as I know, his salary is not part of the cost cap due to him being part of the 3 highest earners. Where is that fair to the other teams?
All big teams have big earners and all of them have the possibility to exclude them. For small teams, who have trouble reaching the budget cap even, this would be unfair indeed.
I'm sure I've read on occasion that RB have listed AN as a contractor consultant so his own income doesn't only come from the RB team as he's involved in other RB projects, if that's the case does that then give them a 3rd person as 1 of the high wage earners after Marko and Horner or have I misunderstood ?
Hi Herr Flick. From what I understand, AN has his own company and RB tried this loophole, but if a team contracts a company in, it is a cost included in the cost cap. Therefore Redbull put AN on the books as an employee so that they could include him in the 3 top earners who don't count towards the cost cap. I may be wrong on this, not 100% sure, but that's how I understood it.
Afternoon FerrariF, thanks for clarifying that for me, niw its much clearer
I'm an Accountant, unfortunately I'm not working for an F1 team, but the budget cap is easy to get around, especially for teams like Merc, Ferrari and McLaren who have road car projects. Major companies like Google or Microsoft push income & expenses around to reduce worldwide tax, F1 teams can easily do the same with expenses. The budget cap is better than nothing, but it will never be perfect.
"but not enough teams reportedly voted for it" No joke? ? Would be interesting to know how many voted against it.
Would be interesting to know who voted against it ? All the biggest teams I would guess.
And Mercedes, Ferrari, Aston Martin, McLaren...... Typical Mercedes troll. Which banned account are you? Doink? Cristi? Or just a second troll account for 44x7 or Vegan?
It is you, he's right! I think he meant Dang, though, or whatever it was, i saw a similar name somewhere today but with a space somewhere in the middle and much fewer likes. Didn't know he was banned, but i guess i know that he's back.
I think it's the same one who used to go by *catering something....
I didn't know Christi was banned, but i'd guess that's the one, although returned with a vengeance.
Not sure how this is a "loophole"? If someone is truly only spending 20% of their time for their team, why should 100% of their salary count towards the cap? Seems to me that this simply provides for fewer opportunities for a larger number of folks to participate, potentially even impacting diversity initiatives?
"If someone is truly only spending 20% of their time for their team, why should 100% of their salary count towards the cap?" Knee jerk reaction to something that is hard to control. "Seems to me that this simply provides for fewer opportunities for a larger number of folks to participate, potentially even impacting diversity initiatives?" You expect to much from the klown class of motorsport officials if you believe they will think a meter in front of their face.
Wait, i thought i had written a reply.. normally i check up if they made it, i guess the one time that i didn't, it got away! So, what did i say... EDIT: Ah yeah. I don't i fully agree with your take on the 100% salary thing. It is a bit petty, but top teams also have more people to call on, more contacts etc., instead of having to make most use of a single employee for the whole season. Many hands make light work, as the saying goes. Finish a job within a set target, let them loose for the rest of the time that you don't need them. Resulting in exploiting and growing the advantage that they already had over smaller teams. So, it's more a penalty for getting things done quickly and efficiently, a bit like how F1 wants things to be done, except, not this time. And i can't totally fault them for it this time, i actually think it could be a fairly effective measure (if they don't do your base salary trick). But it's a bit of a dividing thing, what is good for the sport? Is it having the fastest car? Is it close competition? Is it having the most viewers? Is it having the elite of the elites club? Is it money and prestige, or is it the sport and passion? Where is that middle road? Find out now, on season 6 of Drive to Survive!
I'm not advocating that teams get round the cap with ridiculous salary/bonus structure however it could be reasonable to structure performance bonus money on certain aspects of their job or the teams performance. Enough employees take, for example 15%, of their salary as a bonus structure you save a a wheelbarrow of quid. Many hands do make light work however if you cannot afford a potentially gifted individual full time in the team but could use a 'cost centre' where an employee is only billed as part time for the F1 aspect and use that employee for other non F1 activities then perhaps you can keep that employee and nurture the talent rather than potentially lose that employee to another company. Tis a tough row to hoe for F1 compliance officers to monitor yeah?
Yeah, there will always be ways to do things 'differently'. Because if they put a cap on the amount of people that can be involved, let's say a 1000 personnell cap, then they will find ways to reduce the amount of hands involved with the project. They can start doing business with a suspiciously large amount of "small businesses", where a sole contractor is charged (and not the 50 employees that are working at that small business), or something like that. And it will also be difficult to have a sort of in-house shop to purchase parts, and develop all the upgrades from (so that the FIA knows how many people are working on it and where exactly it all comes from), because then the teams will have to share their secrets with the in-house shop (which might be prone to illegal sharing). And if they do away with keeping things secret altogether, sharing the ideas and parts etc., then it becomes a single spec class, with maybe minor changes here and there. On the other hand, it would at least address the argument of "who's best with equal equipment?". Maybe the team that shares the idea gets a discount on other purchases, or even receives money for having their idea being bought/sold, maybe that might incentivise people to develop faster? It's pretty much impossible to either please everyone or keep a strict control in the rules, there's always something.
Top accountants are now just as important to the big teams as top engineers
The new moneyball EDIT: Wait, didn't that have Brad Pitt? Maybe he's got something to do with it, as he's been spotted at the tracks from time to time.
And if I recall only base salaries are counted towards the cap. A smart team might as well pay a person less salary and include performance based bonuses. I'm sure there are some smart accounting folk that can sort the FIA malarkey.
That's a good idea, you just earned $1.000.000 on your $1 base salary for that!
I love me some word salad surgery, keeps my brains in shape and my body focused.
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