Could this be a function that my TV only supports ARC and not eARC (current HDMI connection for the soundbar)?
When the sound signal goes through the TV, then the TV needs to have eARC and Dolby Atmos support for it to be able to output Dolby Atmos to a soundbar (or AV receiver). With regular ARC, Dolby Digital 5.1 is the maximum supported audio format (try setting the Apple TV to output Dolby Digital 5.1 for that option).
Apple TV →[HDMI]→ TV →[HDMI eARC]→ soundbar
An alternative could be to place an eARC audio extractor in between, to avoid the limitations of the TV:
Apple TV →[HDMI]→ eARC audio extractor →[HDMI]→ TV
↘︎[HDMI eARC]→ soundbar
Examples of such extractors are: HDfury Arcana, HDfury Arcana 2, Feintech VAX04101, OREI HDA-935, OREI HDA-929, OREI BK-401ARC, NÖRDIC 8K HDMI 2.1 eARC/ARC Soundbar Extractor.
… Sonos Arc, which I understand does not support MAT
The Sonos Arc does support Dolby MAT from the Apple TV box, from their own online documentation.