The Telegraph reports that the British government is preparing to transfer more than 400 million pounds ($527 million) to Iran as it seeks the release of a jailed Iranian-British aid worker.
Britain owes the funds to Iran as a result of a disputed arms deal during the 1970s and has sought legal advice about whether it could transfer the money to Iran.
The British daily's report, citing unidentified British government sources and diplomats, says Britain does not want to directly link the payment to the release of jailed charity worker Nazanin Zaghari-Ratcliffe.
But the sources said Britain was seeking to secure the "goodwill" of Tehran in the midst of an effort to win Zaghari-Ratcliffe's release.
British Foreign Secretary Boris Johnson has vowed to do "everything" he can to release Zaghari-Ratcliffe, who was detained in Tehran in April 2016 and sentenced to five years in prison on charges of plotting to overthrow Iran's clerical establishment.
Zaghari-Ratcliffe, a project manager with the Thomson Reuters Foundation, denies the charges.
Arrests during 2015 and 2016 of Iranians with dual citizenship in Western countries, including Zaghari-Ratcliffe, were seen as a bid by the Islamic Revolutionary Guards Corps (IRGC) to undermine Iranian President Hassan Rohani and the process of improving relations with the West.