MarkV, I think the OP's formula is closer to the truth, since if for example back price is 4.0 and lay price is 4.8, then
4.0*1.2 = 4.8, i.e. lay price is 20% greater than the back price.
Whereas if we apply your formula:
100/4.0 - 100/4.8 = 25 - 20.83 = 4.17%