Yeh Mei, a lieutenant with Taiwan's Military Intelligence Agency, took an overseas sightseeing trip in June last year but for unknown reasons did not return for duty. Since then she has been placed on a wanted list by a local court.
Yeh was detained by the UK Border Agency last week for overstaying her visa and her attempt to extend it was rejected, the state Central News Agency said, adding that she has been sent to an immigration removal centre.
Taiwan and Britain have no diplomatic ties or extradition treaty. Lo said China, contrary to speculation, had not played any role in Yeh's movements.
"Some local media had said she defected to the Chinese mainland, which was not true. The Military Intelligence Agency attributed her move to 'personal factors'," Lo said.
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But the former arch-rivals still spy on each other. In 2012 Taiwan's top court rejected an appeal by former army general Lo Hsien-che, who was jailed for life in the toughest punishment meted out in an espionage case in decades.
He was suspected of handing over to China information relating to a project that gave the Taiwanese military some access to US intelligence systems.