If you want to use ARC you will have to change the channel setting to 2.0 as that is for PCM channels and that is all that connection type supports. Also you will need to remove passthrough for HD formats as those are also not supported. Your best approach here would be to read the audio hardware and software guide I linked to above which should be informative of how you should reconfigure your setup.
Additionally you video settings are not optimal. Please see the following…
We recommend people with 4K TV’s set their user interface (UI) to 1080p. Kodi’s UI is not optimized for 4K yet and this can put unnecessary demands on your device and can lead to a suboptimal picture quality, as well as potentially cause other issues.
The settings we recommend are as follows…
Settings>System>Display>Resolution> 1920x1080p
Settings>System>Display>Whitelist> (empty) *
Settings>Player>Videos>Adjust display refresh rate> On start/stop
Some televisions may also need, or benefit from, the following being set…
System>Display>Force 4:2:2 colour subsampling> (enable)
With the above settings your UI will be output in Full HD and your 4K content will be output in 4K. *Information regarding the whitelist can be found here. If you have any doubt, feel free to upload some logs so we can verify that your settings are indeed correct.