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We apply clipping to superposition coded modulation (SCM) systems to reduce the peak-to-average power ratio (PAPR) of the transmitted signal. The impact on performance is investigated by evaluating the mutual information driven by the induced peak-power-limited input signals. It is shown that the rate loss is marginal for moderate clipping thresholds if optimal encoding/decoding is used. This fact is confirmed in examples where capacity-approaching component codes are used together with the maximum a posteriori probability (MAP) detection. In order to reduce the detection complexity of SCM with a large number of layers, we develop a suboptimal soft compensation (SC) method that is combined with soft-input soft-output (SISO) decoding algorithms in an iterative manner. A variety of simulation results for additive white Gaussian noise (AWGN) and fading channels are presented. It is shown that with the proposed method, the effect of clipping can be efficiently compensated and a good tradeoff between PAPR and bit-error rate (BER) can be achieved. Comparisons with other coded modulation schemes demonstrate that SCM offers significant advantages for high-rate transmissions over fading channels.