BAR team boss David Richards has threatened to move his team abroad because of anti-tobacco legislation.
Richards may move part of BAR
British teams will be penalised by an anomaly in a European Union directive to be introduced in 2005, he said.
Britain's decision to adopt the law would stop BAR from advertising tobacco, while foreign-based rivals could still carry the sponsorship.
Richards described it as a "ludicrous situation", and wants the Government to act to end the anomaly.
Richards fears his team could lose millions of pounds in sponsorship, which could result in job cuts.
He said BAR are in the same position as British-based teams like McLaren and Jordan, while Renault and Ferrari will be free to carry tobacco advertising because their countries have not adopted the law.
"Ferrari are the best-financed team in F1, they are based in Italy and have an American cigarette sponsor [Marlboro] and so they will be able to advertise in places like China," explained Richards.
"But because we are a British team we will be covered by the British legislation so we would not be able to run tobacco advertising in China.
"The UK government should not countenance it and it's down to them to do something about it. "
Owner British American Tobacco has pumped at least £300m into BAR's coffers since the team was set-up in 1998.
Richards said BAT was planning to sell the team by the end of 2006 because of a voluntary agreement to end tobacco advetrising in F1.
But the decision by the British Government to introduce the directive means BAT would be forced to quit 18 months early.
"It could have serious consequences because it will affect our planned income stream for 2005," he said.
"We would have to consider cutbacks in the team or look at other alternatives like moving the team abroad.
"You couldn't move the actual structure but you could move parts of the team abroad.
"I have spoken to the Department of Trade and Industry and they say this was not the intention when the legislation was drafted.
"It is the way it has been written which is so restrictive."
Moving to a new base would be a last-gasp alternative and is unlikely to be a consideration for McLaren, whose new £250m headquarters at Woking are still being completed.