I think this is probably unrelated but worth mentioning. This is happening on 2 pc's that I own, both used to work fine until yesterday and both giving same the exact same issue. Tried stopping all unnecessary background processes, antivirus etc. I've tried uninstalling/reinstalling steam, uninstalling/redl'ing-installing witcher (27gb ouch). Note that its ONLY Witcher 3, all other games the overlay is still working including NON-Steam games. Both methods doing the same thing, shows its running in steam but no overlay. I used to have it working by adding the game witcher3.exe directly and also it worked for me if I added the gog galaxy client and launched game via that. Now steam shows the game running but overlay will not register with the game, I don't see the steam popup on load & shift tab doesn't work anymore.
Had been working fine up until yesterday afternoon (4th June GMT+8).