The money is being held in a frozen bank account in Britain, but sending the funds to Iran is complicated because of European Union and USA sanctions on the country.
Nazanin Zaghari-Ratcliffe could have her five-year-jail term extended following Boris Johnson's comments to a parliamentary committee. She denies the charges.
British media have said that she worked for the Thomson Reuters Foundation.
The Ministry of Defence had announced in 2010 that it would return the money which was paid upfront by the former regime of the Shah of Iran for a huge consignment of tanks and support vehicles in the 1970s. The Foundation operates independently of Reuters News.
"This is a longstanding case and relates to contracts signed over 40 years ago with the pre-revolution Iranian regime", a government spokesperson said.
Britain said on Thursday that moves towards paying half a billion dollars to Iran for a debt owed since the 1979 Islamic Revolution had nothing to do with a bid to secure the release of a jailed Iranian-British aid worker.
Hopes of a final settlement to the near four-decade legal battle over the Chieftain tanks, only 185 of which were delivered to Iran prior to the installation of its hardline clerical regime despite the £650m cost being paid up front, had been raised after economic sanctions were lifted as part of the 2015 deal to halt Iran's nuclear weapons programme.
At the time of the ruling Britain vowed to "comply with United Kingdom and worldwide law" but sanctions on Iran meant the money could not be directly transfer the money at the time.
The husband of Nazanin Zaghari-Ratcliffe suggested that his wife's detention is being used by the Tehran government in an attempt to get the British authorities to pay the money.
"This is effectively Iran's money and they want it back", he said.
The Foreign Office is still considering whether it will give diplomatic protection to Zaghari-Ratcliffe, according to the BBC.