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I wonder if we're being a little harsh to the OP. We're not seeing the problem here, but clearly the OP does see a problem or they wouldn't have posted about it, so perhaps the nature of the problem isn't made clear in the original query. What, exactly "cannot continue". Surely you don't want to...
It is a struggle for an outsider to see why this is a problem. Maybe she should be employing you!
It may be a good idea to formally encourage her to take her holiday, but I don't think that she is required by law to take it unless there is danger of exhaustion or psychological damage from overwork.
The lines above my red highlighted section don't actually tell you to do anything specific. And in fact if you file an FPS in a month (which you must do if you paid any employees) that satisfies the requirement.
I can't comment on the operation of Sage, but to make a general point about RTI, the text in red is wrong operation of RTI. You shouldn't file an EPS to say that no PAYE or NI is due for a month. You only file a nil EPS in a month in which no employee payments of any kind are made.
If you don't have a PAYE scheme you don't have to file RTI.
If you have a PAYE scheme filing RTI is compulsory for all employee payments.
The moment any employee earns over the NI Lower Earnings Limit (£109/week) in any period you must start a PAYE scheme immediately if you don't already have...
It depends what accrual rate you use. If you use 12.1% (or more precisely 12.07%) they don't. If you use 28/260 (10.76%) then they do. In either case the total entitlement will end up the same.
She isn't going to be worse off. The Ltd took over the business and employment obligations of the sole trader therefore for the purposes of things like SMP entitlement the employment is continuous back to 2012 and normal SMP entitlement applies.