Hi, a warm welcome to the site. Consider what you would actually do in a situation like this in your setting.
Is it possible that by intervening you could help James understand his words were hurtful and had upset Myra?
Ask for a copy of your schools equality, equal opportunity, diversity or anti-discriminatory policy. It'll contain good reading about what the school aims to achieve and maybe includes expectations.
If you have the
level 2 STL handbook you'll also find supportive reading on pages 51+ of the TDA 2.4 unit equality, inclusion and diversity in work with children and young people
Hth, best wishes