"We have always said that it is our intention to hand over the lead in fighting terrorists to the Iraqi Security Forces as their capability increases," said a British Defence Ministry spokeswoman on Sunday.
"We therefore continually produce papers outlining possible options... this is but one of a number of papers produced over recent months covering various possible scenarios," she said.
"It is simply prudent planning."
The spokeswoman was referring to a document by British Defence Secretary John Reid, which was leaked to a newspaper on Sunday.
The document said Washington hoped to hand over control of security to Iraqi forces in 14 out of 18 provinces in the country by early next year, allowing it to slash US-led troop levels to 66,000 from 176,000.
Britain, for its part, had a plan to cut its 8500-strong contingent to 3000.
The document - entitled "Options for future UK force posture in Iraq" and marked "Secret - UK eyes only" said London would need to reach decisions later this year on troop levels.
Britain, which heads a foreign military force in southern Iraq, wants to give back control of Al-Muthanna and Maysan provinces this October, followed by the other two provinces it handles next April, it said.
"We have always said that it is our intention to hand over the lead in fighting terrorists to the Iraqi Security Forces as their capability increases"
British Defence Ministry
"This should lead to a reduction in the total level of UK commitment in Iraq to around 3000 personnel," a copy of the document said.
The Defence Ministry spokeswoman, however, reiterated that no decision had been made.
"We have made it clear we will stay in Iraq as long as is needed," she said.
About the US, the Reid document stated, "There is a strong US military desire for significant force reductions".
It said, however, that differences had emerged between the Pentagon, which favours a bold drop in troop numbers, and the US-led force, which prefers a more cautious approach.