F1 Budget Cap Exemptions Secure

The FIA has confirmed that Christmas parties and maternity leave will stay exempt from F1 budget caps, alleviating major concerns among teams.

In response to concerns about the budget cap reform, the FIA has reassured F1 personnel on specific points.

There was a time when it was considered to significantly and dangerously reduce the list of exemptions from the budget caps: staff parties and maternity and paternity leave could have been potentially counted within the capped amounts.

The immediate consequence would have been the end, or near end, of Christmas parties and reduced hiring of women. This prompted reactions from team principals in Monaco (read more here).

FIA Reassures F1 Personnel: Maternity Leave and Staff Parties Remain Exempt from Budget Caps

A significant relief for the attractiveness and gender equality in F1.

Federico Lodi, head of financial regulations for single-seaters at the FIA, delivered the good news.

“During discussions with the teams, a series of exclusions, including maternity/paternity leave and entertainment, were considered for inclusion within the scope of the cost cap.”

“In exchange for a corresponding increase in the budget cap levels, teams could continue to fund maternity/paternity leave programs and entertainment events without any impact on the cost cap.”

“But at the latest F1 Commission meeting, it was unanimously agreed that these costs should remain outside the scope of the cost cap.”

Investment Budget Reform in Question

The reform includes other significant changes that are expected to take place: the budget cap will be raised from $135 million to $220 million, but in exchange, the dedicated investment budget will be eliminated and included in the overall amount.

Investment Budget Technicalities Discussed: Asset Depreciation for Cost Reduction

A crucial technical aspect under discussion is how to account for asset depreciation to reduce expenses.

“We are currently evaluating a change in the treatment of these investments, with the expected inclusion of fixed asset depreciation within the cost cap scope and the removal of the deduction for capital expenditures.”

Nonetheless, Lodi confirms the FIA’s general direction: reducing the list of exemptions to prevent the financial regulations from becoming an unwieldy bureaucratic burden.

“The FIA’s intention is to prevent an overall increase in the cost cap level while considering changes to the exclusion scope, the increase in the number of races, and the inflation rate in setting the new cost cap level.”

“All stakeholders have agreed that the existing regulatory framework should be simplified while maintaining its robustness.”

“One of the identified levers for achieving simplification is to review the category of costs that can be excluded from the cost cap, aiming to include more costs within the scope in exchange for a corresponding re-evaluation of the overall cost cap level.”