The FIA announced today the results of its review of Formula 1 teams’ spending during 2022, and has confirmed that all met the cost cap.
Financial regulations were introduced to the world championship in 2021, when teams’ spending was capped at $145 million, with some exceptions and allowances. It was reduced to $140m for last year.The financial period the cap applied to encompassed all 365 days of the year, with teams then having until the end of March this year to submit the paperwork detailing their spending.
“The review has been an intensive and thorough process, beginning with a detailed analysis of the documentation submitted by the competitors,” said the FIA in a statement.
The FIA clarified the budget cap rules earlier this year in an effort to ensure F1 teams were not able to conduct research for their F1 teams through other projects.
“Additionally, there has been an extensive check of any non-F1 activities undertaken by the teams, which comprised multiple on-site visits to team facilities and careful auditing procedures to assess compliance with the Financial Regulations,” the FIA added. “The FIA Cost Cap Administration notes that all competitors acted at all times in a spirit of good faith and cooperation throughout the process.”
The FIA added it “has made and will continue to make significant investments in this department for the collective benefit of the sport.”
This is the second time the teams’ spending has been inspected by the FIA. Last year’s examination took until October to complete, prompting calls for the process to be accelerated in future.
Three teams were found not to have complied with the regulations last year. Williams failed to meet the deadline for submissions and was fined $25,000.
Red Bull and Aston Martin were subsequently found to have committed other breaches. While Aston Martin’s were only procedural, the FIA ruled Red Bull had over-spent by £1.86 million. It was penalised through a reduction in its aerodynamic testing allocation and a fine, which was excluded from its budget cap.
The cost cap was reduced again for 2023, to $135 million before adjustments, and is due to go unchanged for the next two seasons.
Advert | Become a RaceFans supporter and
2023 F1 season
- Track changes, car changes, same winner? Six Singapore GP talking points
- Verstappen and Red Bull are better than all rivals in every single area – Alonso
- Exclusive: Sargeant on why he must drive “on a knife’s edge” to earn a second season
- Marko apologises for “offensive remark” about Perez on Red Bull TV channel
- Verstappen exclusive: “My sister probably had the same amount of talent as me”
Tommy Scragend
5th September 2023, 12:19
No doubt the Red Bull haters won’t accept this and will be convinced that it is “rigged”, and that they are “cheating”.
slowmo (@slowmo)
5th September 2023, 12:47
I’m 100% sure, Red Bull, Ferrari and Mercedes are cheating on the budget cap to be honest but I’m sure people will just see it as clever loop holes whatever is found. I frankly don’t think the FIA are competent enough to adequately enforce it.
SjaakFoo (@sjaakfoo)
5th September 2023, 12:57
I mean they aren’t cheating. If there’s loopholes, fair on them, Red Bull lost out last year because they had a loophole close on them with the tax break not coming to them (in time). After all.
It’s up to the rulemakers to close loopholes if they exist.
Facts&Stats
5th September 2023, 13:02
You won’t get fined for ‘loopholes’; incorrect application of the rules however will earn you a penalty.
cdfemke (@cdfemke)
5th September 2023, 17:05
Exactly that is what he said so yes they might spend more then midfield teams but still be within regulation due to these loopholes. But it is a gamble as some parameters outside of the teams control can change
Simon (@donsimoni)
5th September 2023, 13:47
There was an article either here or on AMuS about ways to circumvent the cost cap that are hard to find via paper trail. The two most obvious ones were:
1) Being a large organization that can shift personnel (esp. engineers) to non-F1 activities. Let them optimize tools and techniques on other projects for example. 2) Having close partners and personal contact. You won’t even need to exchange data. “Don’t bother about turning vanes in area XYZ” can be said in seconds, but can save weeks in development time.
Fred Fedurch
5th September 2023, 22:47
Wow. Did you even bother to read the article?
Here ya go. Pulled straight from said article…….
“The FIA clarified the budget cap rules earlier this year in an effort to ensure F1 teams were not able to conduct research for their F1 teams through other projects.“
Facts&Stats
5th September 2023, 13:00
I would like to know though if the 2021 overspend was deducted from the 2022 allowance, or if the USD7mio fine was included in the actual 2022 costs.
And, alternatively, when including these adjustments if they were still below the 2022 cap.
Not all costs are operating expenses, and overspending in one year can have a roll-over effect on later years (e.g. development costs).
Alex (@smallvizier)
5th September 2023, 13:30
For Red Bull, they do genuine research and development (like all F1 teams) and are based in the UK, so they receive a tax credit each year.
There have been many delays with these credits, and Red Bull’s 2021 credit was paid late, after the end of the period.
Applying the timing rules from International Accounting Standards, they deducted the credit from their tax cost for 2021, even though it was paid late. But the FIA told them they had to deduct it from 2022 costs instead.
That means they breached their 2021 budget cap… but they may well have had MORE money to spend in 2022, because they will have recognised two years of credits in that one year. It was a pretty silly decision from the FIA that caused reputational damage to Red Bull, while actually increasing their budget for the following season.
Alex (@smallvizier)
5th September 2023, 13:34
(note that if the 2022 credit was also received late, they will just have the single year of credits and it will be fair. It’s if it is received late one year, and on time the next, that there’s a problem. And then only because the FIA are making them recognise it based on timing of cash receipts instead of timing of R&D effort.)
SteveP
5th September 2023, 20:26
No. Totally divorced from the team budget and all paid by the sugar-daddy Red Bull drinks corp. Or Mr Stroll in the case of AM.
That’s why Horner bleating about the size of the fine was such a pile of ****.
Oh, and having done silly large amounts of aero dev leading to the breach, what they needed to do was optimise the weight of the chassis (even CH mentioned that) and suspension.
So, with an untouched budget they set about not spending money on aero, and spending it on the other stuff.
Penalty? What penalty?
MattDS (@mattds)
6th September 2023, 9:18
A reduction of 10% highly valuable windtunnel time, which is already limited to begin with especially as a front-running team.
SteveP
6th September 2023, 17:17
7% of the base standard 100% to a team near, but not at back of, the pack.
Two things:
1. Everyone seems to forget to compund the figure and treats it as 10% of the base 100 rather than 10% of the 70% they are reduced to simply by coming first. A figure that isn’t greatly different to the allowance Mercedes have, or Ferrari.
2. The primary issues for this season that carried through from their original 2022 spec were weight and suspension, both required costable time and effort but were totally untouched by the notional penalty.
We’re discussing a notional “penalty” for breaking the rules, not the rules based BoP that applies to all the non-rule breaking teams too.
Yaru (@yaru)
5th September 2023, 13:47
Eh I dislike RB but fairplay to them they followed the rules in 2022 and didn’t cheat.
Yellow Baron
5th September 2023, 22:38
Understandable display of frustration considering they were given a pretty meaningless penalty for the last breach
Ayan G
5th September 2023, 23:23
Lets be straight.. they only cheated two times… and we know you guys (yes… “you POS’s”) won’t accept that.
F1 frog (@f1frog)
5th September 2023, 12:23
I am honestly shocked, and thought the total non-penalty for Red Bull in 2021 would mean the entire grid went over the cap this year. Perhaps there was a warning that penalties would be far more strict this time.
MattDS (@mattds)
5th September 2023, 15:10
@f1frog or maybe, just maybe, a 10% reduction in windtunnel time when windtunnel time is already drastically down from what it used to be, isn’t in fact seen as a “total non-penalty” by the teams. How about that huh?
hahostolze (@hahostolze)
5th September 2023, 16:08
@mattds wait, you mean to tell me that a 400k net overspend on expected tax credits is not in proportion to a 10% deduction in by far the most important tool for car improvement? What on earth could the luminous @f1frog know that we don’t?
F1 frog (@f1frog)
5th September 2023, 17:27
I just think that if you are in an intense championship battle with another team, you have just developed a 400k new front wing (or any part of the car) that is potentially worth enough time that it might give you that edge in the title battle, but it will put you over the budget cap and you know that the penalty is a 10% reduction in wind tunnel time, most teams would probably consider that worth it. It might just win you a championship. And it should never be worth it to take a penalty (like George Russell cutting the chicane to overtake Esteban Ocon in Monza), the penalty should always be much greater. Having a rear wing that opens 0.2mm more than is allowed is not proportional at all to being excluded from the results but that doesn’t mean it wasn’t absolutely the right punishment.
In my opinion, a breach of the budget cap, even a minor one, is a serious enough offence to warrant a punishment that puts Red Bull in the midfield for a year, as that cheating *might* (and I am not saying it definitely did because it is obviously impossible to know for sure) have won them the 2021 drivers’ championship. Yet Red Bull are dominating Formula 1 in a manner seldom seen before this year. How far ahead do you think they would be without that 10% reduction? Clearly it made very little difference to them.
So I can only assume that it was decided that much harsher punishments would be handed out for the same offence in 2023 because I am also not sure about the whole ‘reputational damage’ idea. Or maybe it is just because no team in 2022 was in a position as critical as Red Bull were in 2021. But that blatant act of cheating was not punished harshly enough.
MattDS (@mattds)
6th September 2023, 9:30
@f1frog
Nope, sorry, that’s nonsense. That’s like saying Hamilton shouldn’t have received a 10s penalty in Silverstone ’21 and should have received a penalty that would prevent him from coming close to the podium.
Or like saying Mercedes should have been put in the midfield in 2014 for tyregate instead of “dominating F1 in a manner seldom seen” (if you talk about a “total non-penalty”: this is where it was more applicable).
Of course the above is nonsense, as is the notion that a 0.x % budget breach should imply a punishment that renders a dominant team into a midfield team.
See, that’s the thing: a certain category of fans makes it out as if that 400K is instrumental in the current dominance they have, but then ignore the importance of every percentage point of windtunnel time. I wonder why that is.
How far do you think they would be with that 10% reduction and without the 400K? Do you honestly believe they would be considerably less ahead at this point than they are now? Of course not.
At the end of the day? They received a sizeable reduction of precious windtunnel time, which has carry-on effects, for a breach of 400K. The fact that NO team at all went for a minor overspend – even not Mercedes who are far behind RBR and could absolutely use a small advantage wherever they could get it – speaks volumes. It means 400K isn’t nearly enough to offset a 10% reduction of windtunnel time and they much rather take the windtunnel time instead of losing the 10%. And consequently it means that all the talk about how it was but a “slap on the wrist” or, in fact, a “total non-penalty”, has always been and now really proves to be utter nonsense.
The penalty is fully in line with the rules and regulations regarding the budget cap and possible breaches. And it was more than adequate considering the height of the breach, that has been proven now.
F1 frog (@f1frog)
5th September 2023, 18:59
Or maybe the punishment was announced so late in 2022 that it didn’t make much difference to that season. Maybe it is 2023 when they will all exceed the cap.
SteveP
5th September 2023, 20:34
A 10% of the regulation aero time that the winner gets actually is a 7% reduction, but since they maxed out on the aero aspect in the breach period, they actually needed to concentrate on the non-aero items they could still do with a budget that was untouched.
Damn, forced to spend on the stuff you wanted to spend on, my, my that really is a penalty…
The fine should have been deducted from the budget cap amount, but many people have said that repeatedly.
Mayrton
5th September 2023, 18:21
It was merely a discrepancy in interpretation at the very first time it was enforced. And all other teams knew this perfectly fine. Some may have acted differently in the press, but that was just propaganda. So to me it was to be expected that all would comply this year since all teams simply learned from last year where the boundaries are. Press made a lot out of it back then but I don’t think it even raised an eyebrow at the financial people of the teams.
Fred Fedurch
5th September 2023, 23:40
It was common knowledge 2021 was a slap on the wrist “dry run” and 2022 was going to be the year they brought out the tar and feathers.
DB-C90 (@dbradock)
5th September 2023, 12:29
Not really surprised at all. All team accountants have had a chance to see how good or otherwise the FIA’s team is and will certainly know how to present their data as compliant.
What would have been a shock would have been someone getting it wrong.
Armchair Expert (@armchairexpert)
5th September 2023, 12:36
That’s the worst nigtmare for certain team led by certain team principal and certain driver. Now they can’t pretend they’re being beaten because rivals spent more money. It’s just the case of Max and Red Bull being so much better than their lot. But hey, they can always read some Wikipedia articles about past seasons, when their success was guaranteed by 1s/lap of engine advantage.
RJ
5th September 2023, 13:15
Truth
melanos
5th September 2023, 13:28
While sandbagging
Facts&Stats
5th September 2023, 13:04
It’s September; this process is taking way too long.
Jere (@jerejj)
5th September 2023, 13:11
At least the process was shorter than last year when the outcome came out towards the Mexico City GP.
Lapov Onor
5th September 2023, 13:29
Agreed.
This SHOULD be a case of looking at figures and simple balance sheets. The fact it takes so long infers (to me at any rate, my opinion right or wrong) that multiple teams are utilising creative accountancy that requires questioning and interpretation. 5 months is way too much time and if any team made what they considered to be a genuine error, for example RB and last year’s catering hicup, then they are way too far into the year to be finding out about it, doesn’t leave long anough to put it right.
Yaru (@yaru)
5th September 2023, 13:49
Or you know, auditing is actually difficult and time consuming.
SteveP
5th September 2023, 20:40
It is when the people who prepared the accounts are trained accountants.
I have friends who spent their working years in PWC, HMRC, and a number of banking corporations, all have suggested that when they see clean and clear accounts they suspect either fraud or naivety.
Fer no.65 (@fer-no65)
5th September 2023, 16:48
you’re oversimplifying something that’s inherently complicated.
Bullfrog (@bullfrog)
5th September 2023, 17:42
So is the F2 championship.
Jere (@jerejj)
5th September 2023, 13:10
Good
Keith Campbell (@keithedin)
5th September 2023, 13:26
In the UK, company accounts must be filed within 9 months of the end of the accounting period. So for an accounting period ending December 2022, they must be filed by September 2023. Companies can also choose their period of account, so some teams could have a year end later than December 2022, meaning their accounts wouldn’t be due until later this year. For all the teams to have filed their accounts and the FIA having assessed and reviewed them for compliance, is actually quite a quick turnaround by corporate standards. I’m not sure the exact process the FIA is using to monitor spending for the cost cap, but it’s possible an abridged set of accounts or only certain relevant elements needed to be sent to the FIA in order to speed up the process.
Facts&Stats
5th September 2023, 15:26
AFAIK, in the UK listed companies have to report audited accounts 6 months after their reporting year ends. In the US this is even shorter at 60-90 days (SEC).
Ferrari reported their 2022 Annual Report (including Financial Accounts) in February 2023.
Alianora La Canta (@alianora-la-canta)
5th September 2023, 16:37
No F1 team is fully listed and some teams’ closest connection to a listing is via a parent company (most of which isn’t in scope for FIA auditing).
Facts&Stats
5th September 2023, 18:17
My point wasn’t about being listed or not, but that medium/large companies do not need nine months to close the books and get them audited.
Formula 1 fan
5th September 2023, 15:13
Interesting to read some of the comments indeed.
I would actually love to see an article around the ‘cost cap breach’ that RB did. It had been an accounting issue having to do with a tax-credit that you receive in the UK. This was received too late by RB and was therefore not able to use in the 2021 balance sheet.
Having had to deal with some of these elements myself as well, it is difficult to balance this as you ‘assume’ you get it back as you had been years before.
It would be good to see some research journalism on this, in stead of the constant assumptions that is was all spent on catering.
In my opinion and what I have read about it, this is solely a tax-credit issue and is even corrected this year. As some have already mentioned you might now have a benefit of 1,8 M in 2022 that you can use.
Alianora La Canta (@alianora-la-canta)
5th September 2023, 16:38
The “assumptions” are based on what Red Bull itself told us.
If it was truly related to the tax credit, then Red Bull would have been better off saying so rather than coming up with a separate story about catering.
sethje (@seth-space)
5th September 2023, 17:40
There is a difference between the parts the media grabs and the reality.
RBR never mentioned Catering as the main reason. Some “sarcastic” comments and media outlets did this.
There were several reasons for the overspending. Taxes as the main culprit and in fact money the were unable to use.
A bit above in this topic is a clearer discussion about this.
about 400.000 was the real overspending. The rest was caused by very jealous competitors and biased media.
Its always handy to have a reason when the other party is doing better so you can camouflage your own failures.
SteveP
5th September 2023, 20:51
You will always get a story from Hans Christian Horner.
The only question is whether a grain of truth actually made its way in to any corner.
Anyone recall Horner speaking of “lies” and threatening legal responses? The lies he alleged? That people (waving toward Toto), said “someone” had breached the cap.
The identification of the offender actually coming from CH protesting they weren’t much over, and it was lots of catering.
Hence the running joke about the cost of their sandwiches.
isthatglock21
5th September 2023, 15:39
I think F1/Liberty has pursuaded the FIA to simply look the other way as no to not damage the sport further as the growth stalls/hype wears off. Also cost cap will be close to being dead if it’s breached 2 years in a row as clearly some teams would’ve made it clear they don’t care.
Alianora La Canta (@alianora-la-canta)
5th September 2023, 16:46
I’m not sure what to make of this. Before I read about the complications of the research grants, I had hoped that this could, in fact, be a situation where the story could be taken at face value and all the teams had avoided the strong temptation the FIA had laid in front of them last year. However, the research grant seems like it would be too complicated for the FIA to correctly assess – and the 1.8 m suggested to have become available in 2022 is a huge amount in development terms. It’s a small team’s entire annual development budget. (It is, of course, possible that other British teams were in the same situation, so it’s not as if we can assume Red Bull has an advantage over, say, Mercedes in this context. It does, however, mean a possibly large advantage over their primary rivals Ferrari, unless there’s a similar quirk in the Italian tax code that has heretofore not come to light in the English-language press).
It’s especially surprising considering every team had substantial trouble predicting logistics inflation (which at times was increasing mid-journey and charged in retrospect, and over the course of the year at least doubled in cost for some routes F1 was using). But credit to all 10 teams, who from this evidence appear to have tried their best to comply in 2022 anyway.
Mayrton
5th September 2023, 18:24
I feel sorry for the press. This will cost them dearly.
MichaelN
5th September 2023, 22:46
So over 1 billion US dollars is collectively being spend on winning absolutely nothing. And that’s just the capped part of the budget, the total expenditures of the other eight teams is – conservatively guessing – probably double that. Pretty impressive, for the wrong reasons, but still.
Tifoso1989 (@tifoso1989)
6th September 2023, 10:21
Comment of the year !
Robert
6th September 2023, 21:43
Or, it was 1 billion spent on taking part in something fun. It payed 1000’s of people’s salaries, letting them live off of what they are passionate about for a whole year. And in the process, it provided entertainment for 100’s of millions of other people around the globe. But sure, one could call that “absolutely nothing” too.