The setup you posted looks pretty conventional, so that's good. For the geometry to be correct you want the shank of the tool parallel with the face of the chuck. I use a 123 block against the chuck face, then move the carriage towards the chuck until the tool shank is pressing on the 123 block, then tighten things down. That will give the correct relief angle. Also, make 100% certain the tool is on center. This is for both turning and facing.
Chipping when facing often happens when you get near the center and the surface feet per minute drops to nearly zero, which carbide doesn't like. Unless you're already running really high speeds, I would try going faster when you face. Also, it's a good idea to at least lightly tighten the carriage lock on smaller lathes when making a facing cut.
What sort of RPM are you using when you get the chipping?