"This IPhone is not currently setup to work with carrier you're attempting to use..."

Hello everyone,
I just purchased an Simfree & UNLOCKED iPhone 5 32GB from an Regent Street - Apple store in UK.
The part number is MD299B/A.
When I try to activate it with my iTunes, is gives the error below and does not seem to activate:
"The SIM card inserted in this iPhone does not appear to be supported. Only compitable SIM cards from a supported Carrier may be used to activate iPhone.Please insert SIM card that came with your iPhone or visit a supported Carrier's store to receive a replacement SIM card."
Please help me...!!

You're contradicting yourself.
First you said:
Your iPhone is not locked to any carrier at the moment (it has not been activated yet).
The next activation policy is unlocked with any UK carrier. This means it is unlocked but must be activated with a UK SIM.
Now, you say:
Hi,
We can confirm that the model you purchased is a SIM free unlocked model.
For technical support please contact AppleCare, our service and support partners on be below telephone number, option 2.
Thank you,
Those are 2 different things.
I'm guessing Apple Care is correct. The store is incorrect. Get the store on the phone. Then get Apple care on the phone in a conference call. If the store says it should be unlocked, then they need to get that fixed in the database. They apparently made a mistake when they recorded the serial number in their system.

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