Should an operator charge you VAT on your contract pay off?

Check this issue out from Steve Rowlands (of S60blogger) about Orange (yeah, them again):

Steve writes:

Sick and tired of the lack of customer service from Orange, I decided to cancel my contract with 10 months remaining.

Upon making the phone call to the customer (dis)service disconnections department, I found myself greeted by a rather rude and abrupt representative..

Informing said representative of my intention to cancel my contract, she informed me that the ‘charge’ for doing so would be £200. For the purpose of my sanity, I will leave out the shrapnel from this equation.
“How is this so?” I asked.

“Well, your contract is £20 per month, multiplied by 10 months, equals £200” came the reply.

My contract is £20 per month, but that is INCLUSIVE of VAT. In my understanding, VAT is charged on a service being provided. Since Orange is not actually going to be providing me with a service for those 10 months, why should I have to pay the VAT?

Indeed, do I actually have to pay the VAT? Can I just send them the amount, less the VAT element and be done with it?

Is this another example of l’Orange’s ineptitude of providing excellent customer service? The real kick in the teeth? Vodafone don’t charge VAT on their cancellations, for exactly the reason stated above……

Maybe I’m just barking up the wrong tree. Taxation expert, I am not.

How did they respond Steve? Did they waive the VAT or stick to their guns?