British dual nationals such as Nazanin Zaghari-Ratcliffe should not be used as “political leverage” by Iranian authorities, a Government minister has said.

Foreign Office minister James Cleverly said ongoing legal disputes between the UK and Iran should be kept separate from the “arbitrary detention” of prisoners in Tehran.

It comes after Iranian state TV suggested Britain would pay a £400 million debt to secure the release of Ms Zaghari-Ratcliffe, citing an anonymous official.

But UK officials have since downplayed the idea that payment of the debt would mean Ms Zaghari-Ratcliffe’s imminent release and Mr Cleverly said recent reports out of Iran had been “inaccurate”.

“We have always said that British dual nationals should not be used as political leverage,” Mr Cleverly told Sky News.

“We have also seen a number of occasions where the Iranian regime have used disinformation, we’re hearing inaccurate reports coming out over the last couple of days.

“On the one hand, they are saying that these proceedings are legitimate, we don’t agree with that at all, but then also saying that they are linked to this legal dispute – it can’t be both.

“We’re making it very, very clear. It is in the hands of the Tehran regime to release these people and they should be released.”

The legal dispute dates back to the 1970s when the then-shah of Iran paid the UK £400 million for 1,500 Chieftain tanks.

Britain refused to deliver the tanks to the new Islamic Republic when the shah was toppled in 1979, but kept the cash despite British courts accepting it should be repaid.

Hopes were raised when Iranian state TV reported that the UK had agreed to pay the £400 million to see the release of Ms Zaghari-Ratcliffe.

Mr Cleverly told Times Radio that the dispute was a “completely separate issue” and should “absolutely not” be linked to ongoing imprisonment of British nationals.

“The charges against them are illegitimate, they’re unfounded, their incarceration is completely unacceptable and inappropriate,” he said.

“That is a completely separate issue to the legal dispute that is still ongoing with Iran.

“Iran should absolutely not be linking the two.”

The anonymous official was also quoted saying a deal had been made between the US and Tehran for a prisoner swap in exchange for the release of seven billion dollars (£5 billion) of frozen Iranian funds.

But Washington denied the report, saying suggestions of a prisoner swap were “not true”.

Ms Zaghari-Ratcliffe, 42, of north London, was detained in Tehran in 2016 while taking daughter Gabriella to see her family, as authorities made widely refuted allegations of spying.

She completed a five-year sentence in March, having carried out hunger strikes in protest over her treatment in jail as diplomatic efforts were made to secure her freedom.

But she and her family were delivered a fresh blow last week when she was given an additional one-year jail term.

She was also banned from leaving Iran for a further year.