The advent of the 2018/19 tax year saw the 3% diesel surcharge rise to 4%, which might not seem much in itself, but against a backdrop of increasingly punitive measures by HMRC, CO2 re-categorisation as a result of WLTP pushing many models up a band, and the Government’s recent dilution of the Plug-in Car Grant (PiCG) to ironically exclude hybrids and benefit only electric cars, every pound matters to company car fleets.

In simple terms, a petrol car emitting 120-124g/km CO2 for example is assigned a BIK rate of 25%, which the diesel surcharge/supplement then hikes up to 29% – a move clearly intended to discourage fleet managers, personal contract hire (PCH) customers and other motorists from choosing diesel. With UK vehicular CO2 emissions having risen for the second year in a row and now sitting as high as they were in 2013, flocking back to petrol in the name of hammering down NOx and particulate matter levels might be a policy that backfires, and plug-in and electric vehicles aren’t exactly cheap or abundant in variety.

The 4% diesel surcharge applies to all models that don’t meet something called Real Driving Emissions 2 (RDE2) which, in a very simplified way, is the strictest emissions standard scheduled to be introduced in January 2020 and made legally mandatory from January 2021, all tied in with forthcoming Euro 6d (sometimes referred to as 6d-full) or ‘6.3’ engines and also the new WLTP test that came along in September 2017 aiming to make vehicles’ MPG and CO2 figures more realistic.

The media has, even until quite recently, widely stated that no cars, not even the latest breed of Euro 6d-TEMP-certified models, are eligible to escape the 4% diesel supplement by merit of their already meeting RDE2 standards so far in advance. RDE has a nitrogen oxide ceiling of 168mg/km while the forthcoming RDE2 standard sets the bar even more aggressively at 120mg/km.

These much-publicised figures, though, are actually multiples of the actual core NOx ceiling figure of 80mg/km, the more lenient limit of 168mg/km equating to 2.1 times this level, and the stricter ceiling coming in 2021 corresponding to 1.5 times. Despite Greenpeace and others commenting in the media almost a year ago that Euro 6 engines aren’t as clean as they claim to be, they concede that many manufacturers’ models are well ahead and actually meet the RDE-2 standard, despite it still being two years away.

Organisations like the ACEA are quoted as praising a growing number of car-makers for working tirelessly towards air pollution and quality targets for town and cities as expediently as possible by developing RDE2-compliant models and engines before they’re legally required. In fact, all 270 WLTP-tested Euro 6d-temp vehicles produced results within RDE-2 levels.

This doesn’t necessarily mean that they escape the 4% diesel surcharge/supplement tax, though. Germany’s ADAC, which is their AA/RAC equivalent, lists countless models from Alfa Romeo to Volkswagen that perform impressively greenly to Euro 6d-temp standards, but we contacted our friends in the Peugeot UK press office to confirm if their low-NOx cars, for example, are exempt from the 4% levy – and the answer is now. Craig Morrow’s otherwise positive response reads: “Our Diesels are not RDE2 compliant currently and therefore attract the 4% surcharge. RDE2 is known internally as Euro 6.3 and we will be switching our engines progressively from February, starting with petrols.”

Parkers explains the situation pretty nicely: “What is Euro 6.2 and does it avoid the diesel surcharge? Emissions standards are planned well in advance, as is legislation to respond to them. Euro 6.2 – applicable to newly launched cars from September 2017 and all new registrations from September 2018 – is also known as Euro 6d-TEMP. It is a step in the process linking Euro 6 targets to real-world emissions testing. The Finance Act 2018 is clear on how the diesel surcharge for VED and BIK will be applied, however, and regardless of actual emissions the work undertaken by manufacturers to meet Euro 6d ahead of the 2020-2021 deadline is essentially overlooked. ‘A vehicle meets the Euro 6d emissions standard only if it is first registered on the basis of an EU certificate of conformity which indicates that the exhaust emission level is Euro 6d (and it does not meet that standard if it is first registered on the basis of an EU certificate of conformity which indicates that that level is Euro 6d-TEMP)’

The new Mercedes A-Class, B-Class and GLE

Mercedes is the sole star of the moment, then, having come along with a number of crackers that are sure to be company car fleet winners because their ultra-efficient, green and clean engines already emit low enough Nitrogen Oxide (NOx) levels in terms of mg/km to enable them to avoid the 4% diesel surcharge, and we’re assuming they’re Euro 6.3-classified. In a way, it’s no surprise that the prestige marque from Stuttgart is the first to the RDE2 post, as its models have perennially topped annual contract hire and leasing popularity charts.

Without sinking too far into geek-speak, one of Mercedes’ remarkable new diesel engines is codenamed OM654q and incorporates extended exhaust after-treatment thanks to 90mm of cylinder spacing, an additional underfloor selective catalytic reduction (SCR) catalyst with ammonia blocking and an increased dose of AdBlue, an aluminium block with steel pistons designed with stepped recesses, and cylinder liners coated in NANOSLIDE.

Essentially, Mercedes believes that this 1.9-litre, four-cylinder diesel unit is as clean as it can currently achieve. Of primary interest to our car leasing customers, though, is that the new Mercedes A-Class and B-Class in 200d Sport and 220 d AMG Line guises are RDE2-compliant and escape the 4% diesel tax because tests show that they typically emit between 40-60mg/km NOx, websites like Next Green Car citing the figure as 52mg/km and zero in terms of particulate matter, while averaging 67.8mpg on paper and around 47.7mpg in real-world tests and driving conditions. They’re far from weedy, despite this, the A200d producing healthy peak torque of 320Nm, while the A220d pumps out up to 400Nm, both mated as standard to Mercedes’ 8G-DCT eight-speed automatic gearbox transmission.

It’s one thing presenting the market with a RDE2-compliant, 4% diesel tax-busting hatchback, but SUVs, 4x4s and crossovers continue to be all the rage – and this is once again where Mercedes is the first on the scene. The new Mercedes GLE SUV for spring 2019 is Euro6d compliant and its 3-litre, six-cylinder, OM 656 engine is reported to have stamped NOx levels down to an astonishing 20mg/km with the GLE 400d, which concurrently happens to still be Mercedes’ most potent diesel SUV to date. Technological innovations making this feat possible include dynamic multi-way EGR, a stepped-bowl combustion process, exhaust gas after-treatment that takes place near to the ending, and the debut of variable valve-lift control. Diesel particulate filters have been a hot topic in recent years and Mercedes’ new engines incorporate additional SCR, the resulting acronym being sDPF for technical folk out there.

The new Mercedes GLE SUV for 2019 is also available in GLE 350 d guise, and considering its size and power, maximum CO2 emissions of 184g/km allied to A-Class-equalling 52mg/km NOx, and 40.5mpg on paper, are pretty impressive.

We’re a transparent lot here at Vehicle Consulting and make no bones about many previous A-Class engines having been developed alongside Renault, leading some to refer to the German as a Megane with a posh body and interior, but from what we can gather, the OE654q is all Mercedes’ doing.

Jaguar XF 4 diesel supplement surcharge benefit in kind BIK tax leasingThe new Jaguar XE and XF

As reported by Business Car magazine, Company Car TodayFleet World and Fleet News, the facelifted Jaguar XF saloon for the 2020 model year (MY20) will also avoid the 4% diesel surcharge/supplement tax on benefit-in-kind (BIK), thanks to engine improvements that bring it in line with RDE2 standards. CO2 emissions for the new Jaguar XF are also set to be up to 8% lower than the current model, partly due to ultra-low rolling resistance tyres, and Jaguar reckons the saving for a company car driver over a three-year lease will tot up to a healthy £2,304 for 40% tax-payers, which is not to be sniffed at.

More positive news for company car fleet drivers with a penchant for prestige badges and sporty styling but with no appetite to shell out more BIK tax through PAYE than is necessary came from Jaguar in February 2019. As well as its interior receiving a badly-needed overhaul, the new Jaguar XE, available to order now on business contract hire ahead of spring UK deliveries, will also avoid the 4% diesel supplement tax surcharge if leased in D180 rear-wheel drive guise. RWD generally means engaging handling akin to a BMW, and having to go for the D180 to enjoy cheaper tax doesn’t mean scrimping on styling, as every trim variant from the S and SE through to the R-DYNAMIC HSE are all RDE2-compliant, with 18″ and 19″ alloys making no difference to the first year VED/road tax and monthly BIK tax liability savings presented.

Certain light commercial vehicles (vans) are also RDE-2 compliant well in advance, which is of particular worth to fleets with longer three or four-year life-cycles, even if the diesel supplement isn’t applied to LCVs. A notable example is the Iveco Daily Blue Power, a 3.5-tonne van with a 2.3-litre diesel engine that works in combination with AdBlue and Euro 6 SCR technology. While this variant of the Iveco Daily van costs up to £1,000 more in its list price, fuel savings are tipped to equate to 7%, which is significant for commercial fleet managers.

We welcome contact from fleet managers, company car leasing and personal contract hire (PCH) customers who would appreciate extra guidance on which cars and vans meet Euro 6d-full/6.3 standards and hence avoid the 4% diesel tax supplement.