Had a lengthy phone session with Apple Tech support on this.
I have 2 ATV 4Ks and two 4K displays in one room. The main display (LG B6P) supports Dolby Vision while the older one (LG EF9500) only supports HDR. I also had the same issue with Dolby Vision not being an option in the Video menu for both devices.
The first thing tech support had me do was to make sure all apps were closed out by double-clicking the ATV icon-similar to the iPhone but a feature I was not aware was on the ATV. He had me do do a system restart afterwards but still no Dolby Vision option.
Removing the power cord from the ATV & swapping out HDMI cables with another device that was working properly, then powering back up enabled the Dolby Vision option. Even though there is nothing wrong with your cables, you might want to try this if you still don't have Dolby Vision working.
The difference now with iOS 14, for my display at least, when I go the Apple TV 4K home screen now after switching from another source, the Dolby Vision icon appears immediately on my LG display even without playing a DV source. Netflix is the only service I have that offers Dolby Vision programming.
Unfortunately, after iOS 14, when I now start a Netflix program that I KNOW is Dolby Vision, the Dolby Vision icon will not appear at the start like it usually does. The program is indeed in Dolby Vision though because when I press the info button on my TV remote, the display shows Dolby Vision-quite confusing.
My ATV will l LOSE the Dolby Vision option if it's connected to a display that doesn't support it, like my older LG. Even if I switch back to my Dolby Vision display, it won't show up. I have to power cycle the ATV & do the cable swap that I already mentioned! This was not happening before iOS 14.
Anyone that has the same issue, I suggest trying the troubleshoot methods above: Close out ALL apps, remove ATV power cord, swap HDMI cables if possible.
Your mileage may vary.
I wish there was some way to revert back to the previous iOS for ATV because so far, I'm not impressed.