I agree with the other answers here regarding $\frac{1}{22}$ being the "correct" answer to this question.
However, I also agree with your friends. The correct answer to this question is also $\frac{1}{4}$ depending on how you interpret the question.
I would also have agreed with the assertion that in fact the answer to this question is $\frac{1}{8}$ on the basis that the liar's claim couldn't possibly have had anything to do with the coin-toss outcome itself.
The point being, the question "What is the probability of a biased coin coming up heads given that a liar is claiming that the coin came up heads?" is a bad question, because it can be interpreted in a number of equally valid ways.
In other words, the key problem here is the importance of mathematical rigorousness when stating a problem. The use of the word "given" is a particular pet peeve of mine, since it can be interpreted (linguistically) in many different ways. The mathematical community has informally agreed that it should imply only one of these (the conditional formulation), but the fact that this statement is linguistically ambiguous is not helping, especially when attempting to discuss such problems in a conversational context.
A better and more mathematically precise way to formulate your question is "what is the probability of the coin-toss having resulted in heads, conditioned on the fact that the liar claimed it was heads".
Your friends have effectively interpreted the question as "based on what we know about the liar, what is the probability of the coin having "in fact" resulted in heads (i.e. the liar having told the truth), "given" (i.e. "when") we know the liar lies with a certain fixed probability". Why, $\frac{1}{4}$ of course.
An equally valid interpretation could have been "How is the coin toss affected by the liar's statement?" When "given" the liar's statement, does this affect the coin toss in any way? No. Therefore, "what is the probability of a coin actually landing heads, 'given' (i.e. factoring in the casual influence to the outcome from) what the liar said?". Why, $\frac{1}{8}$ of course!
In other words, like the vast majority of arguments in this world, your disagreement with your friends wasn't a disagreement based on facts, but one based on definitions, masquerading as an argument about facts. The question you ask is twice as important as the answer you give. To paraphrase John Tukey: "I would prefer an approximate answer to an exact problem a great deal more than an exact answer to an approximate problem".
This may sound like a pedantic point, but in more subtle cases, it is in fact a very big problem when working with probabilities in formal problems. Read about the "Monty Hall" problem for a famous example illustrating this nicely.