When an employee is on sick leave, he or she is not entitled simultaneously to claim holiday entitlement under the Working Time Regulations.
In practice, assuming there is sufficient time remaining in that leave year, employees who have been off work sick for part of the leave year will often still be able to take their holiday entitlement under the Working Time Regulations upon their return to work (subject to them giving their employers adequate notice to take that leave).
If, by contrast, an employee returns to work and there is insufficient time left in that leave year to take all his remaining leave entitlement, and assuming there is no contractual provision to the contrary (express, or implied by custom and practice), he will lose his right to take the leave. Assuming his employment is not terminated during the course of that particular leave year (and again, subject to any contractual provision to the contrary), he will not be entitled to be paid for any leave accrued but untaken during that year.